British Parliament in Havoc over BREXIT
- 9 September 2019
CURRENCY MARKET OBSERVATIONS – 9 September 2019
Fundamental Outlook The Trump Government has implemented 15 percent tariff on USD250 billion worth of Chinese imports on 1 September. China will retaliate by increasing tariff on USD75 billion of U.S. imports. Dollar Index (USDX) is trading high above 98.00 amid escalating trade conflict.
The U.S. nonfarm payroll missed the forecast and added 130,000 in August. Unemployment rate held at 3.7 percent. FED chair Powell comments that trade war has weighed down on decisions on corporations. Market analysts reckon the expectation for rate cut increases this month.
China’s caixin manufacturing index rose 50.4 in August and recovered for the first time above 50.0 benchmark in 3 months. On Friday, People’s Bank of China announced thecut its reserve requirement ratio by 50 basis points and some qualified banks will have its ratio to be cut by 100 basis points, starting from 16 September with an aim to stimulate the slowing economy.
Fitch rating agency downgrades Hong Kong from “AA+” to “AA” with negative outlook for its long-term credit default rating. On the other hand, Beijing Government aims to end the street protest before the Chinese national Day on 1 October.
U.K. Prime Minister Johnson extends the summer recess and shut down the Parliament from 7 September to 14 October, coercing a likelihood to no-deal BREXIT and vowing to fulfil it on end October without further delay. Johnson plans for a snap General Election on 15 October and leave no room for Parliament to decide for the BTREXIT matter.
Last Wednesday, British lawmakers have passed a bill to stop no-deal BREXIT. Prime Minister Johnson strips 21 members from Conservative Party after they have showed no support to the Government. On Thursday, Johnson’s younger brother resigned from his ministerial post and Member of Parliament.
Technical Forecast USD/JPY traded slightly higher last week but still contained in the consolidating range. This week, we reckon not much change in our opinion that the movement will be constricted within 105.00 – 107.00 region unless the trend could jump beyond the aforementioned range.
EUR/USD makes new low at 1.0926 that was last seen in May 2017. Market trend bounced about 100 pips before weekend and has left little clue for the forthcoming direction. This week, we forecast the trend will trade in cautious range from 1.0950 - 1.1100 while waiting for clearer directional trend.
GBP/USD settled at 1.2280 after it bounced off 1.2000 support last week. This week, the trend is likely to thread from 1.2150 – 1.2350 in mixed sentiment. We foresee continual recovery at small pace will occur in market as the British Parliament has shut down after 7 September for more than a month.
Gold prices reversed down from USD1550 /oz as Dollar challenged 2-year high at almost 99.00 level. This week, we forecast a high chance to see the trend falling to USD1500 /oz with bargain-hunting emerging at USD1490 /oz region. For the time being, the yellow metal might be facing some liquidation as traders will move fund into energy sectors in coming weeks.
WTI Crude prices are still trading in consolidation inside USD53.00 – USD57.50 /barrel. Technically, we have noticed a gathering strength in market and waiting to push higher in coming weeks. Piercing above USD57.50 /barrel will effectively rise to USD61.00 /barrel in our opinion. Fundamentally, the reasons for such ascension could be due to lower Dollar, recovery in stock markets or rate cut in September.
Silver prices fell from above USD19.50 /oz and going for a correction now. This week, we gather the bears will re-test USD17.50 /oz level before bargain-hunting emerges. Overall market sentiment is prone to weaken and form a consolidating base in coming weeks. Traders are reminded to trade cautiously and be patient in picking new bottoms.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives bounced off RM2163 /MT low last week and closed higher. Market has shown a firm upward reversal on Friday but will probably trade in sideways trend this week. November19 Futures contract closed at RM2203 /MT on Friday. This week, we forecast the trend will move from RM2160 – RM2260 /MT in mixed trading. Breaking beneath RM2160 /MT will trigger bargain-hunting at RM2140 /MT area.
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 firstname.lastname@example.org