US budget deficit at US$3.13 trillion
Fundamental outlook
THE final tally for the US government’s budget deficit in fiscal 2020 came to US$3.13 trillion. The government’s debt totaled US$27 trillion at the end of the fiscal year.
US core consumer prices gained 0.2 per cent in October, in-line with consensus. Core producer prices, excluding food and energy, rose 0.4 per cent, beating than forecast.
US weekly claims for jobless benefits increased to 898,000 for the week ended October 10. Negotiations for a stimulus package between the Republicans and Democrats dimmed, causing the stock market to wobble.
China bought 1.46 trillion yen in medium to long-term Japanese government bonds on a net basis between April and July. This is 3.6 times more than the purchase made the same period last year.
UK has initiated a lockdown, restricting movements to control the spread of the Coronavirus Disease 2019 (Covid-19).
Covid-19 cases surged again in Europe. According to the World Health Organisation, Europe reported more than 7.4 million cases and 251,478 deaths related to Covid-19, rising at an alarming rate.
Technical forecast
US dollar/Japanese yen traded in a narrow range amidst mixed sentiments as predicted last week. The market is still expected to move within 105 to 106 this week until it breaks beyond. The trend can move in either direction due to the dollar’s underlying trend and traders are reminded to exercise caution.
Euro/US dollar showed a possible downtrend on the day-chart. We forecast the trend will be contained initially from 1.16 to 1.18. Beware of a violation beneath 1.16 as this might initiate new selling sentiments in the market due to the rising dollar. As the US election approaches, the dollar will likely recover while the euro recedes.
British pound/US dollar exhibited a potential bearish trend just like the euro. We believe the market will be contained from 1.285 to 1.305. We predict the trend is prone to dive and this downtrend will initiate once the bears pierce beneath the 1.285 support. Our next lower target is 1.265.
WTI Crude prices remained unexciting last week as we predicted. The trend stayed largely from US$37 to US$42 per barrel for many weeks. The trend might trade in lower demand and revisit the lower band within the price window due to profit-taking activities and the recovering dollar. Practice risk control.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives toped RM3,000 per metric tonne. The market is encountering profit-taking activities and might face lower demand this week. January Futures contract settled at RM2,869 per metric tonne on Friday. We predict the resistance will emerge at RM2,920 per metric tonne in case of a short-term recovery. Downside target is at RM2,750 per metric tonne.
Gold prices have been resilient at US$1,920 per ounce with some selling forces on Friday. We foresee the trend will be contained from US$1,880 to US$1,920 per ounce initially. Beware of breaking beneath US$1,880 per ounce that might lead to US$1820 per ounce. The potential recovery of the dollar could lower gold prices ahead of the US election.
Silver prices could not go above the US$25.00 per ounce ast week. This week, we project the trend will dive to US$22.50 per ounce as our next target if gold prices fall. Traders should abandon short-view in case the prices reverse above US$25 per ounce.