The US economy grew by 1.4 per cent in 1Q
THE US gross domestic product (GDP) declined 1.4 per cent in its first quarter (1Q) season which came in worse than forecast. Pandemic took a hit on the economic growth as the Americans strived to recover from the crisis.
President Joe Biden has encountered a snag after he requested US$33 billion from the US Congress to finance the Ukraine war. Russia President Vladimir Putin retaliated by threatening a lightning strike should any nations intervene in the Ukraine war.
Last Monday evening, the People’s Bank of China announced it would cut the reserve requirement ratio on foreign exchange deposits by one percentage point to eight per cent, effective from May 15 onwards. The action came after China’s yuan depreciated to a one-year low against greenback at 6.51 exchange rate.
Russia said it will halt gas supply to Poland and Bulgaria if the transaction could not be dealt with in rubles. General supplies to Eastern Europe are looking highly uncertain after the country’s state-run gas giant Gazprom refused to take US dollar settlement due to the US sanction.
Technical Forecast
US dollar/Japan yen hit above 131.00 last week that was created in April 2002 and retreated. This week, we prefer to stay dormant as the market is reaching saturating top though it is not falling yet. Range is expected to be narrow and contain from 130.00 to 132.00 while traders will remain cautious in this alert zone.
Euro/US dollar is challenging the 1.0500 bottom that was last seen with a bounce-off in March 2017. This week, we shall adopt a cautious observation for the FOMC outcome on mid-week release. Range may be targeted at 1.0400 – 1.0600 region with a possibility to breakout unexpectedly. Traders are advised to preset risk control for their positions.
Pound/US dollar dived last week as the US dollar surged. This week, we foresee the trend will wane further with resistance coming down from 1.2650 area. Downside target might aim at 1.2100 and take the market traders unprepared. Pound is always set to trade at larger range whenever there is a strong fundamental news. Caution is advised for new traders in this market.
Gold prices hit US$1,975 per oz low last week and bounced. Market closed at US$1,900 per oz region on Friday while waiting for stronger catalyst to lead the trend.
This week, we predict the market movement will be constricted within US$1,880 to US$1,920 per oz with a potential to make an upward reversal. A fall in the US dollar will spike the yellow metal in recovery.
WTI crude prices recovered from US$95 per barrel bottom last week. Technically, the next support will cement at US$100 per barrel in case of drawdown. This week, we forecast the range will target from US$100 to US$110 per barrel with mixed trading activity.
Silver prices fell last week and went below US$23 per oz level. This week, we target the support will emerge at US$22 per oz and likely to hold the bear market.
Overall range will be contained from US$22 to US$23.50 per oz with more bargain-hunters expected from the bottoming sentiment. Silver traders need to exercise more patience in term of holding a recovery expectation.
Crude palm oil futures (FCPO) on Bursa Derivatives almost revisited the all—timehigh above RM7,200 per MT last week and has created a double top formation.
Market demand has rebuilt in market as crude and edible oils regain buying traction. July 2022 Futures contract settled at RM7,105 per MT on Friday.
This week, we forecast the initial range will be constricted from US$6,800 to RM7,200 per MT.
Breaking the topside might attempt new historical high at RM7,400 per MT.
Dar Wong has more than 30 years of trading and hedging experiences in global financial markets. The opinion is solely at his own. He can be reached at dar@alaa.sg.