Dollar index falls, giving rise to crude and precious metals

Market fundamentals:

The US dollar Index (US$X) fell below 99 level, giving rise to WTI Crude and precious metals on Friday. Rubber prices on TOCOM and SICOM showed gathering momentum before the weekend. The potential bulls might continue if crude prices maintained this uptrend. Technical recovery is also expected after the recent rollover of the futures contract into a new active month.

TOCOM Rubber closed at 152.30 yen per kg on Friday. The market closed slightly lower on a weekly comparison but the momentum has been holding well in demand. We foresee the trend will be well supported at 150 yen per kg and it would likely to ascend to test 156 yen per kg. Risk control is advised in case of falling below the aforementioned support.

SICOM Rubber closed at 111.10 cents per kg on Friday. This week, we reckon the range is still trapped within 109 to 114 cents per kg but the bulls are prone to test the upside. Breaking above 114 cents per kg could lead to the next target at 118 cents per kg but this could be short-lived due to the demand for rubber.

Commodity market report:

WTI Crude prices rose higher on Friday as the dollar fell. The market settled above US$34 per barrel on Friday that might suggest higher prices this week. We expect a possibility of US$40 per barrel this week due to market short-squeezes. Overall range is predicted to be contained from US$34 to US$40 per barrel as the dollar shows mild weakness. Nevertheless, beware of a potential fall beneath US$34 per barrel due to unforeseen circumstances.

Crude Palm Oil (FCPO)

Futures on Bursa Derivatives trended higher due to rising demand in oil-based markets. August Futures contract settled at RM2,295 per MT on Friday. We expect the trend to be well supported at RM2,250 per MT and it could possibly rise higher to RM2,400 per MT. If the market reverses below RM2,250 per MT, the next support level is expected to be at RM2,200 per MT.

Gold prices traded sideways but exhibited strong support at US$1,700 per ounce level. We hold similar view on the market consolidating from US$1,700 to US$1,750 per ounce in the coming week. However, there is a higher probability in breaking upwards as cumulative interest has been identified in the market. Traders are advised to be patient and observe proper risk control in managing their trade position.

Silver prices showed a strong rising pattern on Friday after the trend closed above US$17.50 per ounce. This is also a sign that silver could be leading yellow metal from now on and show pre-sign of bulls in precious metals. We target US$19 per ounce while the trend sits on US$17.50 per ounce as a firm support. Abandon your long-term view if the trend reverses below this support.

Disclaimer: This report is written for general information only. No liability by the writers, publisher or any third party involved in the distribution of this work.

Dar Wong and Foo Rong from PWFOREX.com. Dar Wong has 30 years of trading and hedging experiences in global financial markets. He can be reached at www.pwforex.com