Fundamental outlook
US non-farm payrolls rose 850,000 in June, much better than the estimated 706,000. However, unemployment rate rose to 5.9 per cent against the 5.6 per cent expectation. Analysts interpret the data as positive. Stock indexes closed at fresh new highs again with S&P 500 closing at 4,352 and Nasdaq Composite Indexes settling at 14,639 points.
US ISM manufacturing gained at 60.6 in June, lower than consensus’ expectations. Jobless claims fell to 364,000 for the week ended June 26 after moving above 400,000 for the past two weeks.
US Treasury Secretary Janet Yellen announced recently that a group of 130 nations has agreed to a global minimum tax on corporations. However, the deadline and exact tax benchmark have not been mentioned. No country’s name has been mentioned so far.
China celebrated its 100th anniversary under the Communist Party on July 1. President Xi Jinping pledged a “complete reunification” with Taiwan and defended the country from being bullied by foreign adversaries. After the speech, Taiwan retaliated by giving a strong rebuke while the US Commerce Secretary Gina Raimondo dismissed the talk delivered by President Xi.
OPEC+ group finished their on-line meeting on Friday with no deal reached. The discussion will continue on Monday to decide on the global supply of crude production that might affect the market price’s trend.
Technical forecast
US dollar/Japanese yen edged slightly higher last week while hovering around 111. We target the trend to be resilient at 111.60 and prone to fall into a correction. Support could emerge at 110. Beware of an unexpected surge above 111.60.
Euro/US dollar traded lower and almost touched 1.18 support last week. The dollar has strengthened slightly higher, putting a lid on the euro. We foresee the trend could be supported at 1.18 and likely to rebound to 1.195.
The range is expected to be moderate but risk control is needed in case of falling beneath the aforementioned support.
British pound/US dollar has shown a short-covering sign on Friday. The market might trade with some buy-back actions within the range of 1.38 to 1.40. However, we foresee the trend is prone to fall towards month-end after a quick recovery. Traders are cautioned of the possibility of prices dropping beneath 1.375.
WTI Crude prices reached US$75 per barrel on Friday at an almost three-year high. The market trend now depends on the policy decided by the OPEC alliance. We reckon the trend could be contained from US$72 to US$76 per barrel for the time being. A price surge is unlikely which puts the market prices into a higher range of US$76 to US$80 per barrel but caution is still forewarned.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives rose last week due to rising demand from regional markets. India cut its import tax on importing palm oil, which aided in pushing up prices. September Futures contract settled at RM3,789 per metric tonne on Friday. We forecast the prices will rise further and probably top RM4,000 per metric tonne before retreating. Profit-taking might emerge after mid-week.
Gold prices have shown a recovery pattern on the day-chart and the support lies at US$1,760 per ounce. The market sentiment remains unchanged from last week and we speculate that the range could be contained from US$1,760 to US$1,820 per ounce in the coming week. Market consolidation is expected for the time being.
Silver prices have exhibited strong support beneath US$26 per ounce. We forecast the trend could continue to rise and reach a topside target of US$27.40 per ounce area. Short-covering is expected after the market has consolidated for the past few weeks. Risk control should be placed below US$27 per ounce in case of an unexpected slide.
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]