Trump tightens sanctions on Iran’s oil exports
Fundamental outlook
US President Donald Trump and his administration tightened sanctions on Iran’s oil exports and ordered all other buyers to stop their transactions with Iran by May 1 or face similar sanctions from US. India and China are the two largest buyers of Iran’s oil.
President Trump vowed to reciprocate the European Union’s (EU) tariffs after the Harley reported a 27 per cent drop in profits. Germany is worried about recession from the rising tariff threats from US.
US orders for durable goods made its biggest gains in over past eight months by 0.4 per cent. US GDP grew 3.2 per cent in 1Q, exceeding forecast.
The US dollar index (USDX) surged to 98, placing a lid across Asean currencies. On Friday, crude prices fell four per cent after President Trump said he ordered OPEC to lower market prices. Gold prices have recovered from a recent bottom made at US$1,266 per ounce.
Technical forecast
US dollar/Japanese yen was at 112.50 level before declining. We foresee the bears will continue to move lower at 110.50 from rising pressure. The market is prone to soften for the time being as the dollar index has peaked at 98.
Euro/US dollar broke below 1.12 and stayed around 1.11 on Friday. We expect the trend to rebound but trade from 1.11 to 1.125. There should be some room for recovery as the dollar is prone to correction.
British pound/US dollar bottomed out at 1.2866. We forecast some recovery to follow through but constricted from 1.2850 to 1.31. Concurrently, we identified the aforementioned resistance is confluent to the EMA200 line. Traders are still observant to Brexit matters.
Gold prices bounced off US$1,266 per oz. Moving forward, we foresee the trend will reach US$1,300 per oz. Overall, the strong dollar still affected the gold. We reckoned there will be sideways consolidation within US$1,265 to US$1,300 per oz before breaking beyond this trend.
WTI Crude prices reached US$66.60 per barrel before falling on Friday after Trump’s remark. We expect demand for the oil to weaken and the dollar may fall too. We foresee a possibility to land at US$60 per barrel before a bargain-hunting activities happen. Trend is expected to be contained from US$60 to US$66 per barrel for time being.
Silver prices bottomed out at US$14.75 per oz before moving back to US$15 per oz on Friday. We reckoned the trend will trade higher but capped beneath US$15.40 per oz. Trade activity is subject to swing for a while before it breaks beyond US$14.75 to US$15.40 per oz.
Crude Palm Oil Futures (FCPO) on Bursa Derivatives traded lower last week after news of a slower decline in US output. The US dollar/ringgit is trading in a tight range from 4.12 to 4.14. July Futures contract closed at RM2,119 per MT and still showed bearish sentiment. This week, the trend will test support at RM2,100 per MT and land at RM2,050 per MT. Topside selling activity is strong at RM2,160 per MT.
Dar Wong has 30 years of trading and hedging experiences in the global financial markets. The opinion is solely his own. He can be reached at dar@pwforex.com