01.07.2019 (The Borneo Post) - Fundamental outlook

THE US government announced new sanctions on the Iranian Supreme leader, Ayatollah Ali Khamenei, on the access to international financial system. Iran rebuked the new sanctions and said this would cut the diplomatic ties between the two countries completely.

At the G20 meeting, most countries leader reiterated on the free trade ties among global partners. French President Emmanuel Macron refused to sign all documents unless the Paris climate treaty is addressed.

US Treasury Secretary cited that the negotiation with China is almost at 90 per cent completed. G20 meeting ended in Japan followed by the Trump-Xi meeting on a trade deal. Traders are still staying on the sidelines and observing the outcome of the trade deal. Analysts reckoned the world economic growth will be affected if more tariffs are added.

Tensions in the Middle East escalated after an unmanned drone was shot down by Iranian military force. President Donald Trump threatened the “obliteration” of Iran if they strike US’ assets. Crude prices have been climbing as traders bet on a supply squeeze.

Technical forecast

US dollar/Japanese yen traded in a small recovery last week. This week, it will depend on the dollar’s trend to move the US dollar/Japanese yen market. We foresee the range will be constricted from 106.50 to 108 until it breaks beyond either directions. Risk control is advised in case.

Euro/US dollar traded at around 1.1380 in a small range last week while confluent to the EMA200 line. We reckoned a huge potential to gain on the upside as long as the 1.1330 support can stay unbroken this week. First resistance is set at 1.145, piercing above this level will probably lead to 1.155.

British pound/US dollar consolidated in small range around 1.27. The market is still clueless on the forward trend as Brexit matter shadows Britain’s economy. This week, we project the range will be prone to a slightly upwards trend, trading between 1.265 to 1.28.

Gold prices hit US$1,438 per ounce, a six-year high, before retreating. This week, we expect the range to be slightly in a whipsaw trend but contained from US$1,400 to US$1,440 per oz. On the other hand, falling beneath US$1,400 per oz benchmark will indicate a new selling force in the market which will test the US$1,370 per oz area.

WTI Crude prices have risen to test US$60 per barrel, driven by rising tensions in the Middle East. However, we also notice a reduction in the day range that indicates falling interest in the market. This week, the trend might reverse down and head back to US$55 per barrel. On the other hand, breaking above US$60 per barrel will likely lead to US$63 per barrel before encountering profit-taking activity.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded in a bearish trend last week on lacklustre export and weaker soyoil prices. A stronger ringgit is another reason for the tepid demand. FCPO September 2019 contract closed at RM1,951 per metric tonne on Friday. This week, we hope to see a rebound but the range could be narrow from RM1,940 to RM1,980 per metric tonne. Breaking beneath RM1,940 per metric tonne will lead to RM1,880 per metric tonne as our next target.

Silver prices topped its three-month high at US$15.55 per oz and fell on profit-taking. The market has good support at US$15.20 per oz and would probably thread sideways within US$15.20 to US$15.50 per oz this week. On hind side, piercing above US$15.55 per oz resistance is highly possible in the attempt of US$60 per oz. We foresee strong buying interest emerging in the US$15 to US$15.20 per oz region.