U.K. Submits Final Plan to EU Council for BREXIT Deal
- 7 October 2019
CURRENCY MARKET OBSERVATIONS – 7 October 2019
Fundamental Outlook The U.S. President Trump is currently facing impeachment inquiry from the House. He further calls for China to open investigation on Biden and his son, double down on the probe with Ukraine.
The U.S. ISM manufacturing index shows worst record in a decade when the data grew 47.8 in September. Trade war initiated by Trump administration has weighed on economic growth and hurt the bilateral trades with China and European Union.
On Friday, America added 136,000 jobs in September while jobless rate slid to 3.5 percent, lowest in 50 years’ record. Dow market recovered before the weekend after it has fallen in earlier last week due to gloomy outlook.
Arbitrators from the WTO have granted the U.S. Government the right to levy tariffs on EUR7.5 billion of European Union goods for illegal subsidies granted to the aircraft maker Airbus jointly supported by Germany, France, Spain and the United Kingdom. The EU Governments reject the verdict and vow to retaliate against U.S. on similar trade case.
China’s Caixin manufacturing index grew 51.4 in September and highest record in 12 months cycle. Separately, Russia President Putin has confirmed that they are helping China to develop an anti-missile system that is currently available in U.S. and Russia defense only.
U.K. Parliament is submitting a final proposal for BREXIT deal to keep Northern Ireland as single market for trading goods but leave the custom union, while facing the test of Brussels to give approval. Traders are watching the Pound very closely as the timeline approaches end-October for the eventual post-effects of BREXIT.
Technical Forecast USD/JPY has been moving within our expect range predicted last week. Market is still uncertain of its directional headway though stronger resistance has emerged at 108.50 level. This week, we forecast the trend will be contained from 106.00 – 108.50 region until there is a breakout beyond this range. Traders are advised to be prepared for risk control in case of adversity.
EUR/USD rose slightly last week due to falling Dollar. This week, we reckon the ascending trend will encounter strong resistance at 1.1050 while moves tightly. Overall trend is expected to be contained from 1.0900 – 1.1050 region for time being. Beware of unexpected movement since Dollar can fluctuate in random swings due to U.S. political news.
GBP/USD has been moving in tight range below 1.2400 last week. As U.K. is approaching nearer to BREXIT deadline and traders are losing confidence in PM Johnson, we foresee there could be a plunge in Pound starting from this week. While resistance is acting strong at 1.2350 area, the bears might take control and head south with potential to reach 1.2000 benchmark anytime soon.
Gold prices made a quick recovery from USD1460 to USD1520 /oz last week but overall trend is still caught in a sideways trend. This week, we suppose the trend will be unchanged and probably still move inside the same range but prone to trade in the lower region. The alternate pace of Gold and Crude still applies since Dollar Index (USDX) still lingers on high side above 98.00 level.
WTI Crude prices tested the USD51.00 /barrel support again last week. Market bounced off and might recover this week. Hence, we reckon the alternate pace between Gold and WTI will apply in market correlation. This week, the trend will likely trade higher from USD51.00 – USD56.00 /barrel due to short-covering positions in market.
Silver prices traded in sideways consolidation from USD17.00 – USD17.70 /oz last week. Moving forward, we target the trend to fall again in coming week with resistance building up above USD17.80 /oz level. Range is expected to be contained from USD16.80 – USD17.80 /oz region.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in tight consolidation last week. Range was mainly contained from RM2130 – RM2180 /MT while supported above EMA200 line. December19 Futures contract closed at RM2148/MT on Friday. This week, we predict the range will stay indecisive in mixed sentiment. However, breaking in either direction is possible with the extension reaching RM2050 /MT or RM2240 /MT once it pierces beyond the initial range.
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