U.S. – China Tension Intensifies amid Pandemic Crisis
- 18 May 2020
CURRENCY MARKET OBSERVATIONS – 18 May 2020
Fundamental Outlook The U.S. consumer prices fell 0.8 percent in April on monthly comparison. Excluding fresh food and energies, core prices slid 0.4 percent that was worst data since 1957. The filings for jobless claims for the week ended 9 May was reported at 2.981 million, bringing the aggregate number to 36.5 million till date.
Federal Reserve chair Powell reiterates that policymakers are not considering negative interest rates at this time. However, President Trump has been nudging the FED officials to welcome negative rates as solution to stimulate the falling economy.
President Trump threatens to cut all ties with China and saves the repayment of USD500 billion on Treasury Bonds held by the Beijing Government. China responds by urging United States to meet halfway for working mutually to fight against pandemic crisis.
The crude prices have recovered after the production cut by OPEC+ countries have taken effect on 1 May. Saudi Arabia further stresses on cutting another 1 million barrels production per day from 1 June onwards, in addition to the current 9.7 million barrels reduction currently.
Technical Forecast USD/JPY traded in narrowing range last week as we predicted. This week, we remain unchanged in our forecast that the trend will be contained from 106.00 – 108.00 until the next breakout. There is no clue on the directional trend at the moment until we see the Dollar Index (USDX) taking a lead in a new headway.
EUR/USD has displayed strong support at 1.0770 level and hovered at this region before weekend. Technically, we project the market movement will be contained from 1.0750 – 1.0900 range in coming week. Just like USD/JPY, Euro currency is now waiting for Dollar to take the lead and trigger the next directional trend in the currency pair. Traders are advised to exercise caution in case the trend extends beyond the consolidated range mentioned above.
GBP/USD has broken down below 1.2200 support last week and turned this level into a strong resistance now. This week, we foresee the market might fall deeper with resistance emerging at 1.2200 area. Technically, the immediate psychological support lies at 1.2000 benchmark but violating beneath this level will drive lower to 1.1750 area. Traders need exercise risk control in case the trend reverses above 1.2200 due to unexpected circumstances!
Gold prices touched the 7-1/2 high at USD1752 /oz on Friday and settled on high side. This week, we forecast the high probability of yellow metal shooting higher. Inversely, Gold or Dollar prices will fall in order to push the Gold demand into new intra-year high. Technically, we expect the support to be firm at USD1725 /oz in case of drawdown. Breaking above the USD1760 /oz will likely take a new jump to USD1800 /oz benchmark.
WTI Crude prices have been approaching USD30.00 /barrel on Friday after sequential days of price ascension. This week, we reckon the trend will be well resisted at USD30.00 /barrel and likely to take a drawdown at USD26.00 /barrel. In case of persistent uptrend, the next target will be USD34.00 /barrel that is ambushed by many profit-taking activities.
Silver prices climbed higher last week as we predicted. The market has yet to reach USD17.00 /oz as we expected. This week, we aim for the topside target to be USD17.50 – USD18.00 /oz if the bulls persist in ascension. Support lies at USD15.80 /oz and should not be broken to ensure the bullish trend.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives climbed higher after the holiday weekend. Recovery was partly due to higher Crude prices and growing demand in food commodity. July20 Futures closed at RM2089 /MT on Friday. This week, market trend may consolidate from RM2050 – RM2100 /MT range initially. However, piercing above the aforementioned resistance will drive the demand higher at RM2200 /MT as our next target.
DAR Wong has 31 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