UK records decline in 1Q GDP
Fundamental outlook
UK recorded a decline of minus 1.5 per cent in its gross domestic product (GDP) for the first quarter of the year in the wake of the spread of Covid-19 in the country. This compared with its growth of 3.1 per cent in 4Q.
In midst of Covid-19 outbreak in UK, European Union (EU) residents feel that are not being treated equally as other British citizens in UK. Based on a survey, one in every 10 EU resident expressed their intention to leave after June.
US consumer prices rose 0.8 per cent in April while core prices gained 0.9 per cent. Both data were higher than expectations and triggered a fall on the Dow market on Wednesday by 681 points. Traders rekindled worry on the growing inflation in the country.
US retail sale was unchanged in April while core declined 0.8 per cent against an expected surge. The US stock market recovered on Friday as traders interpreted inflation pressure. However, most analysts and investors are looking forward to companies’ earnings reports this week to gauge the market’s direction.
Technical forecast
US dollar/Japanese yen traded sideways as we expected. The market has been resistant at 109.50 last week. We forecast the trend could range from 108.50 to 110 this week with swing movements. The dollar is still supported for the time being while traders are watching the inflation pressure.
Euro/US dollar traded in a narrow range last week but supported above 1.205. We expect some uncertainties in the market while movement could remain within 1.20 to 1.22. Abandon your short-term view if the market breaks above 1.22 resistance.
British pound/US dollar tried to hold firm above 1.40 level last week but could not pierce above 1.415 resistance. We project the range to remain from 1.40 to 1.42. We target the trend to be prone to falling but beware of the slight possibility of the market surging above 1.42 that might initiate a new uptrend.
WTI Crude prices are currently well supported at US$64 per barrel. The trend might rise but succumb to pressure at US$68 per barrel. Sellers should control their risk in case the prices rise above US$68 per barrel. Traders should prepare to face uncertainty in the market this month.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives climbed higher last week as demand rose. Global bullishness on food commodity has pushed up palm oil prices and creating optimism among traders. July Futures contract settled at RM4,524 per metric tonne on Friday. This week, the market could continue to explore the upside uncharted territory at RM4,600 per metric tonne after the rollover to a new active month. Support lies at RM4,400 per metric tonne.
Gold prices traded in a small range last week but levelled back to US$1,840 per ounce on Friday’s close. We retain our view and foresee the range could be contained from US$1,800 to US$1,850 per ounce. However, be very cautious of a high possibility in surging above US$1,850 per ounce and run up to US$1,880 per ounce.
Silver prices narrowed last week. Movement has been contained from US$26.50 to US$28 per ounce with a builtup momentum. There might be a surge in market prices above US$28 per ounce and challenge the US$30 per ounce benchmark.
Dar Wong has more than 30 years of trading and hedging experiences in global financial markets. The opinion is solely his own. He can be reached at dar@alaa.sg.