Dow Whipsaws amid Pandemic Fear
- 9 March 2020
MARKET OBSERVATIONS – 9 Mar 2020
Dow Whipsaws amid Pandemic Fear
Fundamental Outlook The U.S. ISM manufacturing index grew 50.1 in February and lower than forecast. Last Tuesday, Joe Biden won primary victories in North Carolina, Texas and Arkansas and media called it as Super Tuesday.
On Wednesday, the U.S. Federal Reserve cut interest rate by 50 basis point and surprised the market, in wake of fighting the impact of coronavirus. The pandemic attack is hitting badly at U.S. and European regions with rising confirmed cases.
American non-farm payroll gained 273,000 jobs in February and higher than estimate. Unemployment rate fell to 3.5 percent and lowest in 50 years. The U.S. 10Y Treasury Bonds yield falls below 0.8 percent amid spreading fear of pandemic virus into the country.
International Monetary Fund announces USD50 billion program to fight the coronavirus outbreak and hope to assist infecting countries immediately. European countries are turning hysterical as the pandemic cases rise rapidly in Italy and France.
Crude prices fall to low of 2017 after Russia could not agree with OPEC for the steep production cut for lifting oil prices. Dollar Index (USDX) has been plummeting for past 2 weeks from 99.80 tops to 96.00 bottoms on Friday’s close.
Technical Forecast USD/JPY has fallen sharply recently. Market closed 105.00 on Friday’s close and probably will go for rebound this week. Technically, we expect the trend to be supported at 104.50 area but limited to 106.50 resistance in case of recovery. Sideways consolidation is likely to occur for 1-2 weeks.
EUR/USD traded in sharp recovery last week as Dollar plunged. Market has broken above our predicted resistance at 1.1100 level and turn this area into strong support now. This week, we forecast the trend will slowdown and probably trade from 1.1200 – 1.1400 range. Secondary support will emerge at 1.1100 level.
GBP/USD pierced above 1.2900 level last week and closed at 1.3050 on Friday’s close. This week, we presume the range will be contained from 1.2900 – 1.3200 region with initial bullish sentiment. However, beware of breakout from this target range and risk control needs to be installed in order.
Gold prices made a very rapid recovery last week from below USD1600 /oz and settled at USD1674 /oz on Friday. The market has formed a double-top formation on day-chart and become hesitant in further advancement. This week, we reckon a possible drawdown while contain inside USD1630 – USD1690 /oz. Breakout beyond this range needs to exercise caution.
WTI Crude prices had a sharp fall on Friday after Russia disagreed to the production cut with OPEC leaders. Market plunged from USD46 /barrel to below USD42 /barrel in weak demand. This week, we foresee the trend will test USD40 /barrel support before some bargain-hunting arises. Resistance will emerge at USD44 /barrel.
Silver prices rose at slower pace than yellow metal last week. Market has stabilized at USD17.50 /oz region in mixed trading. This week, we expect the trend will consolidate in sideways inside USD17.00 – USD18.00 /oz. From the Gold /Silver ratio, we foresee the Silver prices will have limited base prices in case of falling and market is prone to move sideways more often.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded lower on Friday after traders booked profits from past 4 days rise. May20 Futures contract settled at RM2450 /MT on Friday. This week, the market is prone to consolidate around RM2500 /MT area in mixed trading activity. Range is expected from RM2400 – RM2550 /MT but breaking beyond this target region needs to exercise caution.
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