China tightens grip on Hong Kong, rattling markets
Fundamental Outlook
HONG KONG’S stock market saw heavy losses over China’s push for a national security law that drew rebukes from the US and Europe. The Hong Kong citizens are worried and angry about a possible early termination of the ‘One Country, Two Systems’ policy which was supposed to end before 2047.
US jobless claims for the week ended May 16 was at 2.4 million, bringing the aggregate to 38.6 million Americans filing for benefits. Existing home sales fell 17.8 per cent in April on a monthly basis. On an annual rate, the data slid 17.2 per cent from a year ago.
US President Donald Trump threatened to cut off funding to the World Health Organisation and withdraw its membership. However, it will need the national Congress to appropriate the decision.
US Senate passed bill that could delist some Chinese companies in American stock market. The bill applies to all foreign companies but it is targeted at China.
New car registration in European countries fell 76 per cent from a year ago, suffering an impact from the Coronavirus Disease 2019 (Covid-19) outbreak.
Technical forecast
US dollar/Japanese yen traded in a small range last week but has been capped beneath 108. We reckoned selling pressure will stay resilient at 108 while confluent to the EMA200 line. Downside support is identified at 106. Traders are reminded to be cautious when the movement breaks beyond the range of 106 to 108.
Euro/US dollar topped the 1.10 resistance on the day-chart last week before closing at 1.09 on Friday. We foresee the trend will encounter some liquidation while support emerges at 1.08. Overall range should be contained from 1.08 to 1.10 for the time being until the movement breaks beyond either directions. Risk control is advised.
British pound/US dollar attempted a false break above 1.22 last week but settled at 1.216 on Friday. We project the range to be initially contained from 1.205 to 1.23 with strong resistance from above. Downside is vulnerable and might open to new selling activity once the bears engulf below 1.205.
Gold prices behaved in strong sentiment last week, above US$1,720 per ounce. We expect some strong bargain-hunting activities at US$1,700 to US$1,720 per ounce. Observe the rise above US$1,760 per ounce that could spike into a new bullish sentiment. However, beware of an unexpected fall beneath US$1,700 per ounce.
WTI Crude prices have reached US$34 per barrel as we predicted last week. Market sentiment is making a gradual recovery. We forecast the range will be contained from US$31 to US$34 per ounce region in mixed trading. However, breaking above US$34 per barrel might attempt US$40 per barrel as our next target. There is a gap to cover at US$40 per barrel before the trend falls again.
Silver prices topped at US$17.60 per ounce last week and traded slightly lower before the weekend. There is a tendency of the prices falling back to US$16.50 per ounce for a correction or go higher into the next target. We presume the break above US$17.60 per ounce level might attempt US$19.00 per ounce as our next target. However, beware of false violation for just one to two days before the trend sinks beneath US$17.60 per ounce again.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in a small range. Demand has been supported by recovering crude prices in market as OPEC+ countries reiterate production cut. August Futures closed at RM2,170 per MT on Friday, higher on a weekly comparison. We expect the trend will be bullish, with downside support emerging at RM2,100 to RM2,130 per MT region. Breaking above RM2,210 per MT might propel the bulls to attempt RM2,300 per MT level.