US warns of further clampdown on companies linked to China’s government
Fundamental outlook
THE US Government warns global companies of possible violations of US law if their operations are found to be linked, even “indirectly”, to the Chinese government in Xinjiang. The Biden administration added more 14 Chinese companies and other entities to its economic blacklist over alleged human rights abuses and possible hightech surveillance. The Foreign Ministry of China dismissed this allegation and rebuked that the US Government is smearing China’s development.
The US consumer prices increased 5.4 per cent in June from a year earlier, the highest recorded since August 2008. Excluding food and energy, core prices climbed 4.5 per cent, the highest increase since September 1991.
Federal Reserve chairman Jerome Powell said that the economy needed to improve more before the central bank could change its monetary policy. He further commented that the job market has improved but still far below par, pre-pandemic.
China’s GDP grew 7.9 per cent in 2Q. Retail sales rose 12.1 per cent in June from a year ago, which was higher than expected. Industrial production climbed 8.3 per cent, beating consensus’ expectations.
The OPEC has reached an agreement with the UAE. According to media sources, the compromise reached between Saudi Arabia and its smaller neighbour on Wednesday will raise the UAE’s baseline to 3.65 million barrels per day from next April onwards.
Technical forecast
US dollar/Japanese yen has been supported at 109.50 level and we expect more bargain hunting could arise if the bears draw down to the 109 benchmark. We predict the trend could be contained from 109.50 to 111 region with potential to trade sideways. The dollar’s strength might regain some demand.
Euro/US dollar traded in a tight range last week but beneath 1.19 resistance. We predict the trend could be softer due to the regaining dollar. The range would likely be contained from 1.1750 to 1.19. Currently, the ultimate support is identified at 1.17 benchmark.
British pound/US dollar has shown strong resistance at 1.39 last week and prone to fall further. We foresee the market could slide further in the coming week with emerging support at 1.36 level. The resistance could move lower to 1.385. Volatility is expected in the market in mixed sentiment.
WTI Crude prices arched down from US$75 per barrel last week and might head for a correction in July. We reckoned the trend might go lower to US$68 per barrel after OPEC’s announced its intention to increase production.
The overall range could be contained from US$68 to US$73 per barrel with some profittaking activities expected.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded firm after the roll-over last Thursday. September contract topped RM4,200 per metric tonne before rolling over to October contract. October Futures contract settled at RM4,131 per metric tonne on Friday. We predict the trend could begin a correction with selling pressure above RM4,150 per metric tonne. The downside target might reach RM3,900 per metric tonne or lower due to profit-taking activity.
Gold prices turned down from US$1,832 per ounce on Friday after the dollar regained strength. The market might re-test US$1,790 per ounce support before encountering buying demand. We expect the range to be contained from US$1,790 to US$1,820 per ounce region with some profit-taking activities.
Silver prices exhibited a bear-pattern on Friday. We have identified resistance at US$26.20 per ounce while the trend might test US$24 per ounce support. The trend is prone to be bearish over the short-term, hence traders should exercise caution in risk management and picking bottoms.