US-China trade talk constructive, Brexit conundrum continues

Fundamental outlook THE US Treasury Secretary Steven Mnuchin says that US–China trade talk has been constructive but no details have been released yet. The talk was held in Beijing to replace the Trump-Xi meet which was supposed to be held in Mar-a-Largo.

The US Bond yields inverted from a three-month debt to 10year debt instruments, showing signs of a possible recession. The Dow Jones benchmark slowed down as investors stayed on the sidelines.

Housing prices in London fell at its fastest rate in a decade as the Brexit bites. The national house price index slid 3.8 per cent in 1Q19 compared with the same period a year ago. Current account dropped 23.7 billion pounds in the final quarter of 2018, declining for the third consecutive quarter.

The European Union ( EU) agreed to extend the Brexit to May 22 if the UK MPs approve an agreement by the end of March. If a deal has not been passed, the impasse could see the execution of the Brexit on April 12. So far, UK’s Parliament has reached a political deadlock over the Brexit issue after the voting failed for a third time in favour of Prime Minister Theresa May’s deal on Friday.

WTI Crude prices made the biggest quarterly rise for the first time in three months in January 2019. Supply cut has been reinforced by OPEC, Russia and the US sanction on Iran and Venezuela. Technical forecast US dollar/Japanese yen moved in a narrow range last week in mild uptrend. This week, we reckon the trend will be strongly resisted at 111.50 to 112. The market is prone to fall if it could not clear above 112 in the coming week. First support is expected at 110 but falling beyond this benchmark will initiate a new selling trend.

Euro/ US dollar traded in weak demand last week but the technical chart shows strong bargain-hunting forces at 1.12. This week, we foresee a possibility of a reversal in the trend from this support area and it could begin to rebound. The range is expected to move from 112 to 114 in mixed sentiment.

British pound/US dollar is still trapped in mixed sentiment due to the Brexit issue. This week, we forecast the range will be contained from 1.30 to 1.33 until it breaks beyond this constriction. There is no clue to the trend as traders are still keeping a close observation on the outcome of the extension date.

Gold prices saw a strong engulf pattern on week-chart at closing on Friday. This week, we expect the trend to be bearish but supported at US$1,275 to US$1,280 per ounce. Traders can attempt to enter market from the extreme ends for short-term gains.

WTI Crude prices traded in a narrow range last week while hovering around US$ 60 per barrel. This week, we expect the market to ascend as the dollar may fall. Upon rising, we maintain our view from US$58 to US$62 per barrel while prone on the ascension.

Silver prices traded lower last week and near to US$15 per ounce level. This week, we have identified strong support at US$14.80 to US$15 oer oz region in case of a drawdown. Market will probably bounce off this bottom and move into a consolidation. Sideways trend is expected at this phase and cap beneath US$15.50 per oz.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives declined last week as the European Commission concluded the palm oil cultivation results in excessive deforestation and the use of palm as biofuel should phase out by 2030.

Futures contract in June 2019 closed at RM2,103 per MT. This week, we foresee the bears will drive lower and test RM2,040 per MT while resistance will be at RM2,150 per MT. Breaking beneath RM2,040 per MT support will test the next lower region at RM1,970 per MT before buying interest emerges.

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@pwforex.com