Dow Falls at Deepest Range in a Decade
- 19 August 2019
CURRENCY MARKET OBSERVATIONS – 19 Aug 2019
Fundamental Outlook President Trump says he will delay part of the tariffs on Chinese imports till December for the sake of consumers’ shopping seasons towards year-end. Just when the market investors begin to be relieved of this truce, the U.S. Treasury yield went into inversion for first time in more than decade on last Wednesday and dented the stock markets. Dow market plunged more than 800 points on Wednesday form previous day closing due to fear of coming recession.
The U.S. core consumer prices, excluding fresh food and energy, rose 0.3 percent in July on monthly comparison and better than forecast. Throughout last week, the Dollar Index (USDX) headed back from 97.10 to 98.00 level before weekend and put a cap on commodity prices.
On Friday, President Trump made a conference call to CEOs of JP Morgan, Citibank and Bank of America after the stock market dipped in big fall on Wednesday. The corporate heads mutually expressed the economy could be better if the U.S. – China trade war can be resolved.
U.K. consumer prices rose 2.1 percent in July on annualized rate and above forecast. Last week, the Pound traded in small recovery for 100 pips against Dollar and closed at 1.2150 on Friday. Investors are still staying cautious on U.K. dilemmatic economy due to a potential no-deal BREXIT in coming October.
Technical Forecast USD/JPY bottomed 105.00 recently and will begin to trade in consolidation. This week, we foresee the trend will move in mixed sentiment while contain from 105.00 – 107.50 range. Falling beneath 105.00 level will need to be controlled with risk management.
EUR/USD has fallen to 1.1100 region while caught in sideways trend. This week, we reckon the trend will stay in whipsaw due to the swing of Dollar Index. However, strong support is identified at 1.1050 region and likely to push the trend into a sideways movement while resisted beneath 1.1200 level.
GBP/USD is currently supported at 1.2000 and likely to be contained from 1.2000 – 1.2200 range. Market traders are staying away from this market as more attention is staked at precious metals and stock index recently. However, falling beneath the aforementioned support in August month will continue the bear trend in Pound.
Gold prices edged higher to USD1525 /oz last week but in small day range. Technically, we reckon this could lead to a coming correction if the bulls couldn’t clear above USD1530 /oz this week. Generally, we expect the range to be largely contained from USD1490 – USD1530 /oz and very mixed in trading activity. However, breaking in either direction beyond this range will indicate a new headway for a short period of time.
WTI Crude prices traded in USD53.50 – USD57.50 /barrel last week. Moving forward, the market carries strong potential to rise further so long as the trend could stand above USD53.00 /barrel. Meanwhile, we forecast the range will stay unchanged in coming week but sentiment will gradually build up on the upper prices below USD58.00 /barrel. Trading above USD58.00 /barrel will indicate a new bullish recovery in market.
Silver prices have shown sign of slowdown in bullish trend. This week, the range could be contained from USD15.70 – USD16.40 /oz with potential of down move correction. In our general opinion, Silver goes alongside with Gold trend but the initial correction will be slower in reaction compared to Gold prices. Long traders should prepare to take profits and buy back at lower prices upon correction.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in small correction after rollover to November month. The November19 Futures closed at RM2192 /MT on Friday. This week, we reckon the trend will be resilient at RM2240 /MT due to heavy profit-taking activity. Downside support is identified at RM2160 /MT and trend is likely to move into correction within the target 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