US economic growth prone to inflation
Fundamental outlook
US consumer prices rose 0.6 per cent in March and core prices gained 1.6 per cent. Both figures exceeded forecast and indicate that economic growth is prone to an inflation.
Federal Reserve chairman Jerome Powell said policymakers would not likely raise rates this year despite the stronger economy. He further remarked that a faster recovery from the vaccination roll-outs and fiscal support could kick in. Dow benchmark and S&P 500 Index closed at fresh new highs on Friday at 34,200 and 4,185 for the weekend.
President Joe Biden’s administration signed a new sanction on Thursday against Moscow for interfering with the US election last year. The sanction comprised of a list of more than three dozen of entities and individuals possibly involved in cyberattacks and casting interference during the election last year.
China grew 18.33 per cent in 1Q from a year ago, slightly missing expectations. Retail sales gained 34.2 per cent in March on an annualised basis, beating forecast.
The World Health Organisation warned of an alarming rise in Covid-19 infections worldwide and reminded every country to remain vigilante. To date, there are more than 139 million Covid-19 cases reported worldwide with 2.9 million deaths.
Technical forecast
US dollar/Japanese yen broke below 109 and went into a downwards trend. We expect the support at 108.30. The range is expected to be contained from 108.30 to 109.30 initially but beware of an untimely breakout after mid-week.
Euro/US dollar is approaching the 1.20 resistance. We forecast the price movement could be contained from 1.1850 to 1.2050 while prone to trade lower within the range. Selling forces will be expected on the topside in case of a pull up trend. Traders are reminded to be alert and cautious.
British pound/US dollar bounced off 1.3670 last week. The market might trade upward within the range from 1.3750 to 1.40. Mixed activities could occur in market but beware of breakthrough beyond this range.
WTI Crude prices rose higher last week and stayed very closed to our predicted range. We presume the trend could remain firm and trade from US$60 to US$65 per barrel. However, selling pressure is expected to emerge at the topside. Traders should exercise caution on high crude prices as OPEC members are gradually adding production due to a recovery in demand.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded sideways last week as some traders bargained and bought from bottoms. June Futures contract settled at RM3,730 per metric tonne on Friday, slightly higher on the weekly close. We foresee the trend could swing from RM3,650 to RM3,800 per metric tonne but piercing above this range will initiate a new move up to RM3,900 per metric tonne as our next target.
Gold prices pierced above US$1,760 per ounce towards the weekend.
The market has been bullish as we predicted. Moving forward, the market could climb higher as we project the range to be between US$1,760 to US$1,810 per ounce. The weakening dollar index remains as a key catalyst to stimulate gold prices.
Silver prices settled briefly below US$26 per ounce Friday. The market might trade sideways before trading higher. Initial range is expected from US$25.50 to US$26.50 per ounce while traders could be keen to pick bottoms. Be prepared to see an escalation once the bulls charge above US$26.50 per ounce in the near future and target at US$29 per ounce in May.