Optimism in US stock market as Biden begins office appointments
Fundamental outlook
The US stock market cheered as news circulated that President-elect Joe Biden has chosen former Federal Reserve chair Janet Yellen to be the next Secretary of Treasury. Biden also handpicked a new national security team.
On Tuesday, Dow Jones benchmark surpassed 30,000 level for the first time in history. At the week’s market close, S&P 500 also settled at a record high of 3,638.35. The Nasdaq Composite also made an all-time-high settlement at 12,205.85.
President Donald Trump said he will only concede if the electoral college votes for Biden. Until now, Trump still claims that there has been massive fraud in the election though no concrete evidence has been produced. Last week, WTI Crude reached US$46 per barrel level again that was last seen in March. The recent weakening in the dollar has helped pushed vrude and stock indexes higher while precious metals fell.
Technical forecast
US dollar/Japanese yen traded sideways last week in a narrow range. The trend looks weak though it is limited to 103.30 to 104.80 range. We project the trend might fall once it breaks the aforementioned support.
Euro/US dollar was slightly bullish last week while challenging the 1.20 level. We forecast the trend could initially stay in a narrow range from 1.19 to 1.20 but extend in either direction. The trend will depend on the strength of the dollar index.
British pound/US dollar traded beneath 1.34 last week and remained stagnant. We expect the market’s sentiment to remain the same from 1.32 to 1.34 until the movement breaks in either direction. We still believe there could be strong selling pressure above 1.34.
WTI Crude prices broke above US$44 per barrel but stayed below US$46 per barrel last week. The market might gain higher ground if the bulls protrude above US$46 per barrel. However, the major benchmark at US$50 per barrel will be a big challenge for oil traders as funds might move back into the gold market.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded sideways last week but pulled up aggressively on Friday. February Futures settled at RM3,340 per metric tonne on Friday. The bulls might continue to climb higher. Immediate resistance is identified at RM3,400 per metric tonne but there is a possibility of moving above and hence, cause a short-squeeze market. Support lies at RM3,250 per metric tonne in case of a drawdown.
Gold prices broke below US$1800 per ounce support on Friday. We believe the support could emerge at US$1,770 per ounce and likely consolidate here. We predict the market sentiment could remain low during December while stock indexes gain new heights. Immediate resistance could emerge at US$1,820 per ounce.
Silver prices dipped last week as market funds sought after stock indexes. We project the market trend could slide further once the support gives way at US$22.00 per ounce. Our next level on the downside will be near to US$20 per ounce while resistance lies at US$23.20 per ounce level.
Dar Wong has 30 years of trading and hedging experiences in global financial markets. The opinion is solely his own. He can be reached at dar@alaa.sg.