Fundamental outlook
THE US Senate passed a US$1 trillion bipartisan infrastructure plan on Tuesday, a huge step for the Democrats as they try to push President Joe Biden’s sweeping economic agenda through Congress.
The US wholesale prices jumped one per cent in July, indicating the start of a recovery in market demand. On Friday, Dow benchmark and S&P market both closed at new fresh highs. Dow Jones settled at 35,515 level while S&P closed at 4,468 points.
UK GDP grew 4.8 per cent in 2Q, an improvement from minus 1.6 per cent growth in 1Q. Its manufacturing production grew 0.2 per cent in June, still below forecast.
The Covid-19 Delta variant has risen rapidly across the globe, further placing a dent on the overall economic recovery. Most countries have implemented restrictions on unvaccinated people in public places. China has shut down a whole shipping terminal in Ningbo-Zhoushan port after just one new Covid-19 case.
World Health Organisation is calling for US$7.7 billion financial aid. Officials say the budget is urgently needed to help low-income countries survive the Delta variant by providing vaccines, oxygen and medical care.
Technical forecast
US dollar/Japanese yen fell on Friday after the dollar dipped below 110. We forecast the market might turn bearish with resistance emerging at 110. The downside potential might reach 108.50 this week if prices take a slide. Observe the dollar trend as a leading factor.
Euro/US dollar reversed upwards after almost hitting the 1.17 floor. We reckoned the trend could be bullish with range likely to move from 1.175 to 1.19. Traders will be busy in finding new market positions if gold prices also begin to recover as greenback declines.
British pound/US dollar saw strong support at 1.38 last week. The market chart exhibits strong bullish sentiment while the support should remain intact. We predict the bulls will attempt 1.40 some consolidating at 1.385. Abandon your long-term view in case of falling beneath 1.38.
WTI Crude prices exhibited a slowdown in demand on Friday despite the weaker dollar. Market traders could be moving funds to stocks and metals this week instead of crude products. We expect the market could be resisted at US$70 per barrel and contained between US$65 to US$70 per barrel. Sideways trend is expected for the crude market.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in a bullish trend last week before the roll-over to November. The overall market sentiment is still firm but it might go for a small correction this week. November Futures contract settled at RM4,405 per metric tonne on Friday. We expect the range to be contained from RM4,300 to RM4,450 per metric tonne but the market might lead higher if it breaks above this resistance towards the weekend.
Gold prices recovered on Friday after the dollar weakened. We foresee the trend could be well supported at US$1,750 per ounce and likely to recover at US$1,800 per ounce. Mixed trading activity is expected until the bulls can break above US$1,810 per ounce from new demand. Control risks if the trend falls below US$1,750 per ounce.
Silver prices saw strong support at US$23 per ounce and has begun to turn up. The market trend might rise and reach US$24.70 per ounce before some profit-taking activities emerge. Traders should observe the trading range from US$23 to US$24.70 and tighten their risk management. A breakout above US$27 per ounce indicate bullish sentiments in August.
Dar Wong has more than 30 years of trading and hedging experiences in global financial markets. The opinion is solely his own. He can be reached at [email protected].