Dow Fell More than 600 Points on Fridayâs Close
- 3 February 2020
MARKET OBSERVATIONS – 3 Feb 2020
Dow Fell More than 600 Points on Friday’s Close
Fundamental Outlook The coronavirus continues to spread across the Asia and move into the western countries. The U.S. Government has imposed travel restriction and mandatory quarantine for inbound tourists from China. Dow fell 603 points on Friday’s closing for fear of coronavirus outbreak.
The U.S. economy grew 2.1 percent in final quarter and matched forecast. However, the overall growth marked 2.3 percent for 2019 and below the previous year 2.9 percent gains by comparison.
On Saturday, Chinese official statistics revealed a total of more than 11,791 cases of coronavirus onshore mainland while death toll at 259. Economically, China’s manufacturing PMI rose to 50.0 in January as expected, maintaining growth at 50.0 benchmark.
The FED policymakers keep FED fund rate unchanged at 1.5 percent – 1.75 percent but boost the excessive reserve rate by 5 basis point to 1.6 percent. Chair Powell expects inflation will move closer to 2 percent in coming months despite the yield curve has turned inverted again. By technical appearance, the yield of 3Y Bond has risen higher than 10Y Bond, indicating an imminent recession.
Bank of England keeps the interest rate unchanged at 0.75 percent and asset purchase program at GBP435 billion. However, central bank chief Carney expresses willingness to cut rate should there be a slowdown in post-BREXIT.
As of 11pm London time on 31 January, U.K. has executed BREXIT and formally left European Council after 47 years of membership. Moving into coming months, British cabinet will continue to negotiate with EU Council on the mutual free trade agreement issues.
Technical Forecast USD/JPY fell on Friday after hovering around 109.00 for past few days. This week, the market may be prone to go southward and test 107.80 level. Resistance will emerge at 109.00 – 109.30 in case of retracement.
EUR/USD bounced off 1.1000 last week and closed at 1.1100 on Friday. This week, we foresee a potential to test 1.1150 resistance confluent to EMA200 line on day-chart. Overall range will be contained from 1.1050 – 1.1150 region but beware of breaking beyond this extremes. Adversity needs to be controlled with risk management.
GBP/USD celebrated in rising trend on Friday for BREXIT. Fundamentally, we project this bullish sentiment will be short-lived as strong resistance has been identified above 1.3300 level. This week, overall range will be contained from 1.3100 – 1.3300 region but heaving selling will be expected on topside.
Gold prices have been rising slowly last week as Dow market weakened. This week, we expect the trend to be firm and probably will cross above USD1600 /oz again. Overall range will be contained from USD1570 – USD1610 /oz while waiting for new fundamental influences on market. Breaking beyond this range needs to be controlled with risk management.
WTI Crude prices traded lower last week and is now testing the USD51 /barrel support area. This week, it is crucial to anticipate a rebound as we reckon the range will trade from USD51 – USD54 /barrel. Nevertheless, beware of breaking below USD51 /barrel that might trigger new panic selling in oil market.
Silver prices traded in small ranged from USD17.50 – USD18.00 /oz last week. Technically, we have spotted a change in momentum in market and presume the initial range will be contained from USD17.80 – USD18.30 /oz. However, there is a high potential to pierce above USD18.30 /oz and rise further to USD18.80 /oz level.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in whipsaw trend after market bounced off RM2575 /MT region. Selling activity is mainly triggered by global sentiment in oil and stock indexes. April20 Futures contract settled at RM2599 /MT on Friday. This week, we project continual selling while resistance will emerge strong at RM2650 /MT level. Downside potential may reach RM2450 /MT region.
DAR Wong has 30 years of trading and hedging experiences in global financial markets. The opinion is solely at his own. He can be reached at email@example.com