US inflation reaches near 40-year high
Fundamental outlook
US consumer prices accelerated 8.3 per cent in April on an annualised rate, reaching its near highest level in more than 40 years. Core prices, excluding fresh food and energy, gained 6.2 per cent from a year ago, surpassing expectations.
US President Joe Biden said he could drop some of the tariffs imposed on Chinese imports which was signed by former President Donald Trump. Biden reiterated that the Covid-19 outbreak and the Ukraine-Russia conflict have spiralled, pushing US’ inflation to its highest in 40 years.
US Senate Committee passed a new bipartisan No Oil Producing and Exporting Cartels (NOPEC) bill with a 17-to-four majority. The bill is intended to control and manipulate oil prices by OPEC members. Top ministers from OPEC conglomerate have rejected this new legislation, saying such an act will bring chaos to global energy prices.
China’s consumer prices gained 2.1 per cent in April from a year ago, exceeding forecast. Producer prices rose eight per cent on an annualised rate, surpassing consensus’ expectations.
Technical forecast
US dollar/Japanese yen dipped to 128. We forecast the trend will trade from 128 to 130.50 and stay sideways.
The market has begun to soften but stayed resilient at 132 with strong selling pressure. Only breaking beyond this target range will lead to a new price extension.
Euro/US dollar reached a crucial support at below 1.04, attracting market attention. Policymakers need to react and reverse the trend from 1.04 bottoms to 1.06.
Breaking beneath 1.0350 level will lead to 1.00 benchmark that was last seen in 2002. It could be disastrous for the euro region if the euro devalues to on-par with the dollar.
British pound/US dollar fell last week but stayed supported at 1.22. We foresee the trend will likely recover and stay within 1.22 to 1.24. Breaking beneath 1.22 will likely become disastrous as this could bring the market to test 1.20 as the major support.
WTI Crude prices tested US$100 per barrel again last week and bounced. The trend might move sideways if the resistance acts strong at US$110 per barrel. The sideways trend could surface within US$100 to US$110 per barrel. Beware of a possible break above US$110 per barrel that will lead up to US$120 per barrel if the dollar weakens.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in a narrow sideways range without clear direction last week.
The market has rolled over and will begin trading in August this week. July 2022 Futures contract settled at RM6,363 per metric tonne on Friday.
We foresee the market will likely test RM6,000 per metric tonne before recovering. The range is expected to move from RM6,000 to RM6,300 per metric tonne.
Gold prices weakened as the market perceived a strong dollar last week. We have identified a strong support at US$1,780 per ounce.
Topside resistance is limited at US$1,850 per ounce if the recovery emerges. We project a volatile and whipsaw trend in gold for the coming week.
Silver prices broke above US$22 per ounce support last week. The market landed on US$20.50 per ounce region before the weekend. We forecast the trend will likely trade within US$20 to US$22 per barrel amid mixed sentiments. Trader are more prone to move into the gold market.