Fundamental outlook
US’ S&P 500 rose to a record high again on Friday and closed at 3,668 points. President Joe Biden is confident of passing the relief package worth US$1.9 trillion despite resistance from Republican senators. Market investors anticipate the rise in stock markets.
The eurozone economy contracted 0.7 per cent in 4Q. The annual GDP contracted 6.8 per cent in 2020 due to the impact of the Covid-19 pandemic. Former ECB chief Mario Draghi has accepted an offer from Italian President Sergio Mattarella to form a new government.
In the first meeting of 2021, Bank of England retained its main lending rate at 0.1 per cent and the target stock of asset purchases were kept at 895 billion pounds. Policymakers said the British banks would need at least six months to prepare for a shift into negative interest rates.
The OPEC+ maintained its oil output policy as the price of crude hit its highest in almost a year, a sign that deep supply cuts are draining inventories while demand recovery remains uncertain at this rate. OPEC+ is expected to retain the supply output steady while Saudi Arabia will cut one million barrels production per day for this month and next month.
Technical forecast
US dollar/Japanese yen reached a temporary resistance at 105.50. We expect the trend will move between 105 to 106 in mixed sentiment. The dollar is prone to a strong trend but traders are staying cautious in observing an uptrend. Risk control is recommended in case the market movement breaks beyond the aforementioned range.
Euro/US dollar bounced off 1.1960 support last week. The market might recover but capped beneath 1.211. Some whipsaw movement is expected in the market amid uncertainties. Traders are reminded to observe the dollar as the main catalyst the Euro-US dollar trend.
British pound/US dollar closed at near 1.375 top and prone to pierce higher in the coming week. The support is firm at 1.3650 and would likely ascend higher. Breaking above 1.3750 might reach 1.40 as our next major benchmark. However, abandon your long-view if it falls beneath 1.365.
WTI Crude prices settled above US$56 per barrel on Friday, a 13-month high. We predict there could be a strong bearish factor above US$58 per barrel while resisted at US$60 per barrel. The overall range is expected to be contained from US$55 to US$60 per barrel. Traders are cautioned to be observant on OPEC+ and their decision on the global production cut.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in sideways trend and in mixed sentiment. The market seemed ready for another bull run soon after strong support at RM3,200 per metric tonne. April Futures contract settled at RM3,382 per metric tonne on Friday. We project the support could rise at RM3,340 per metric tonne and aim for first breakout above RM3,400 per metric tonne. In case of an eventual uptrend, the bulls could reach RM3,500 per metric tonne.
Gold prices dipped beneath US$1,800 per ounce last week but closed at US$1,811 per ounce on Friday. It is crucial to check the dollar’s trend for an inverse correlation to the yellow metal. We forecast the range could be contained between US$1,780 to US$1,830 per ounce in mixed sentiment. Traders should be alert in case the prices fall lower and test US$1,750 per ounce.
Silver prices reached a six-month high last week above US$30 per ounce for just one day before falling. We reckoned the market movement could be contained from US$26 to US$28 per ounce in mixed trading activity. Dropping below US$26 per ounce might lead to the next support at US$24.50 per ounce while encountering bargain-hunting.
Dar Wong has 30 years of trading and hedging experiences in global financial markets. The opinion is solely his own. He can be reached at [email protected].
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