Prices of goods and services rising worldwide, signaling heightening inflation
Fundamental outlook
US consumer prices jumped 6.2 per cent in October from a year ago, stoking worries of a possible high inflation. On a monthly basis, the data rose 0.9 per cent while core inflation gained 0.6 per cent, both exceeded consensus’ expectations.
Traders in the Fed fund futures expect rate hikes to occur in July and December. Last Wednesday, the dollar index climbed to 95 in line with the tapering programme that might come into place by end-November. However, gold prices have also risen due to possible heightening of inflation worldwide.
At the UN talks in Glasgow, China and US have pledged to increase cooperation on climate change issues. Governments from around the world met and discussed on Paris Agreement and on how to reduce the impact of global warming.
UK’s economy grew 1.3 per cent in 3Q, below expectations. Due to the wake of the pandemic crisis, Britain’s economic recovery has lagged behind the other G7 nations for the July to September period.
Technical forecast
US dollar/Japanese yen stood firm above 113 and will likely rise further. The market is limited to the first resistance at 114.50 but piercing above this benchmark could trigger a short squeeze trend to 116. Fundamentally, we foresee the dollar could remain strong until the end of the month.
Euro/US dollar has exhibited a new bear trend last week as the dollar rose. We foresee the resistance could emerge at 1.1480 in case of a pull-up. Upon breaking beneath 1.14 support, the bears might drive down to 1.12 as our next target. Traders should be cautious in their risk control.
British pound/US dollar looked bearish in the day-chart but it might pull up this week. The resistance is expected to emerge at 1.35 in case of a quick recovery. Beware of breaking beneath 1.335 which could dive lower to 1.315.
Choppy movements are expected in the market.
WTI Crude prices failed to cross above US$84 per barrel last week. The market has come back to US$80 per barrel on Friday. We forecast the trend might fall once it breaks below US$79 per barrel.
A downward movement beneath US$79 per barrel could drive lower to US$75 per barrel which could also be a sign of profit-taking activity. On the other hand, resistance is beginning to build up above US$82 per barrel.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in a small recovery last week but short from RM5,000 per metric tonne. Traders are staying cautious while waiting for the rollover on Monday. January Futures contract settled at RM4,936 per metric tonne on Friday.
The trend could trade lower after the rollover. We predict the movement will be contained from RM4,550 to RM4,800 per metric tonne after the active month moves to February.
Gold prices broke above US$1,840 per ounce level last week and rose to a five-month high at US$1,860 per ounce at the weekend’s closing. We target the range could be contained within US$1,840 to US$1,880 per ounce as traders adjust their positions. Beware of piercing above US$1,880 per ounce which might spike up to US$1,920 per ounce level. Gold will serve as safe haven whenever there is an inflation in the global market.
Silver prices have a good breakout on Friday. We foresee the trend could surge higher and stay at US$25 per ounce support.
We project the bulls could reach US$26.50 to US$27 per ounce region due to rush of buying demand. This week, we reckoned precious metals will be the market’s focus while crude prices weaken.