US consumer sentiment decline as inflation fear rises
Fundamental outlook
US University of Michigan Survey of Consumers sentiment index for May posted an initial reading of 67.4 in May versus 77.2 last month, missing consensus’ expectations at 76. The decline charts a 12.7 per cent fall due to inflation fear.
On Friday, Dow jumped and closed at 125 points after a consecutive rise for eight days, its best week in 2024. Gold and silver prices regained strength last week as the dollar traded in a jittery pattern. The US dollar index (USDX) failed to close above 105.50 level before the weekend close. The Bank of England retained its monetary policy at 5.25 per cent. The Central Bank Governor Andrew Bailey reassured that a rate cut is likely to occur before the General Election in December.
Technical forecast
US dollar/Japanese yen made a gradual recovery last week from 154 to above 155. The market has encountered strong selling pressure and might be fall again in the near future. We foresee the trend might trade within 154 to 156. Breaking beneath 154 might lead to 152 as our next target.
Euro/US dollar traded sideways last week. The market might be trapped within 1.07 to 1.08 while waiting for a new catalyst. In our opinion, a potential breakout in either direction will extend another 50 pips.
British pound/US dollar moved in a narrow range last week. The market might stay sideways within 1.2450 to 1.26 until a breakout occurs. The trend might break in either way and extend another 100 pips. Traders should stay alert for this unexpected trend.
Gold prices settled above US$2,350 per ounce on Friday, gathering new demand. We forecast the market might trade within US$2,340 to US$2,400 per ounce in whipsaw movement due to mixed sentiments. There is no certainty of piercing above US$2,400 per ounce as new market demand is beginning to move into silver. Caution is reminded to manage this market risk.
WTI Crude prices traded in a narrow range last week and submerged beneath US$80 per barrel. The market might be contained within US$77 to US$80 per barrel but it will probably break the topside resistance eventually. The trend will potentially rise to US$82 per barrel.
Silver prices pulled up from US$26.50 per ounce to US$28.70 per ounce last week. We forecast the market might continue to strengthen this week with support at US$27.70 per ounce. The overall range might ascend to US$29 per ounce as our immediate target. More market buyers are entering market as interest for precious metals are gradually shifting out from gold to silver.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded higher and fell towards the end of last week. Market demand slid and subdued demand might rollover into August 2024 before traders build new positions. July 2024 Futures settled at RM3,810 per metric tonne on Friday. We reckoned the market might hold the selling sentiment and consolidate within RM3,750 to RM3,850 per metric tonne. New demand needs to gather for a while before the trend could recover into higher prices.
Dar Wong has more than 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.