Trump revives wall issue, China records its slowest growth since 2008
Fundamental outlook
US President Donald Trump created news headlines again by threatening to shut down the government if Congress refuses to pass the US$5 billion bill for building the US-Mexican border wall. The deadline is set on midnight of last Friday and we expect to see a malfunction in Trump’s government until year-end.
US Secretary of Defense Jim Mattis has resigned from Trump’s administration, citing ‘fundamental difference’ with the President as a reason for his resignation. He tendered his resignation two days after President Trump announced the withdrawal of US troop from Syria without General Mattis’ knowledge. Dow Jones market plunged 414 points at closing on Friday.
China has agreed to put a hold on increasing tariff rates on US auto import from January 1, for 90 days. The national GDP for the third quarter (3Q) grew 6.5 per cent, the slowest pace since the 2008 financial crisis. Government leaders have promised to cut more taxes in 2019 to stimulate the economy.
The Bank of England (BoE) retained the interest rate. Governor Mark Carney said the Brexit uncertainties have intensified over the past months and might pull inflation below the two per cent target next year. Technical forecast US dollar/Japanese yen traded lower last week as the dollar receded. We expect some bargain hunting to arise at 110.50 to 111 in case of further drawdown. Recovery is resisted strongly from a topside pressure. Hence, we forecast the currencies’ trade to be contained from 110.50 to 112.50.
Euro/US dollar has shown a strong engulfing pattern during Friday’s market close. However, we reckoned the support is firm at 1.1250 to 1.13 in case of a declining trend occurs this week. We believe the market will thread sideways in narrow range from 1.1250 to 1.1450 region.
British pound/ US dollar bounced off recent lows at 1.25 but hovered at 1.265 currently. This week, we reckon resistance will emerge at 1.2720 and should not be challenged. There is a high chance a bear trend would resume if this resistance is intact.
Gold prices have broken above the previous resistance at US$1,240 per ounce and it is now threading at US$1,255 per oz. This week, we foresee the trend will rise after a quick consolidation. The range is forecast to move from US$1,250 to US$1,270 per oz.
WTI Crude prices broke down to lower prices as American stocks plummeted last week. The market has dipped to below US$46 per barrel. This week, we foresee the trend will decline to US$42 per barrel and hold over the year-end holiday season.
In our opinion, silver prices market will be contained from US$14.40 to US$14.80 per oz until early January, following yellow metal’s trend.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives recovered. Demand for soyoil and palm olein increased in China last week and spiked the FCPO prices. This week, we predict some correction will occur and support at RM2,110 per MT may be tested again before climbing in January.
DAR Wong is a professional in the financial industry based in Singapore with 29 years of global trading experiences. The expression is solely his own. You may reach him at dar@ pwforex.com.