Borneo Post Online (30/09/2019) –

Fundamental outlook

THE World Trade Organisation (WTO) arbitrators will finalise a 15-year old dispute brought on by the US against the European Governments to compensate for what they say are illegal subsidies granted to the plane maker Airbus. The process of impeachment on President Donald Trump has started on his intention to influence the 2020 election. Trump administration called for a block on all Chinese investments but this could be a market diversion for his supporters. This resulted in price declines for Alibaba and Baidu’s shares.

US Treasury Secretary Steven Mnuchin said he called for the Chinese delegation to skip the visit to Montana farmers on earlier this month, so as to avoid further confusion since the Chinese counterpart has agreed to make purchases for farm products. President Trump is surprised and unaware of this arrangement.

The US Lower House called for the inquiry of impeachment on President Trump for abusing power to influence the 2020 election. An investigation has been opened based on a transcript of tele-conversation on July 25 between Trump and President Volodymyr Zelensky of Ukraine. In the conversation, Trump instigated Zelensky to investigate his political peer Joe Biden, former US Vice President, and his son.

UK Supreme Court ruled that the order for the suspension in Parliament by Prime Minister Boris Johnson is unlawful. Lawmakers are calling for Johnson to resign and most Parliament members are expecting the Brexit to have no deal.

Technical forecast

US dollar/Japanese yen traded in our target range. We retain most of our view that the trend will be contained in tight movement from 107 to 109. However, due to the uncertainty of the dollar, there is no clue on a breakout of the aforementioned range in either way.

Euro/US dollar could not recover above 1.10 due to the strong dollar trend. The market has submerged to below 1.0950 and might dive lower soon. We forecast the bears will head down to test 1.0850 support while topside resistance emerges at 1.10.

British pound/US dollar fell off 1.25 after negative news on the unlawful suspension of the UK Parliament and a possible no deal Brexit. The pound is facing strong headwinds. We foresee the range will be contained from 1.22 to 1.24 as traders adopt a wait-and-see attitude on the pound.

WTI Crude prices traded in slightly lower prices, narrowing at US$55 per barrel. We reckon a possible reversal will occur and regain the market foothold at US$60 per barrel. However, bear in mind the support at US$55.00 per barrel is crucial and breaking beneath this level will expose the bear to US$52 per barrel.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded lower on the weekly chart but has been supported at RM2,140 per MT. Market dropped to a six-week low due to weaker demand and fir output. December Futures contract closed at RM2,150 per MT on Friday.

We reckon a mild recovery will occur in tight range from RM2,140 to RM2,200 per MT amid some short-covering. However, beware of breaking beneath the RM2,140 per MT support that will lead to RM2,100 per MT.

Gold prices closed below US$1,500 per ounce after the market topped off US$1,535 per ounce. We have identified an initial consolidation range from US$1,485 to US$1,515 per ounce. However, there is a likelihood of piercing below the support and testing the next lower ground support at US$1,450 per ounce in October.

Silver prices have exposed the bear factor in the market and likely to continue its fall in the coming week. We forecast the trend will meet the next support at US$16.80 per ounce if the trend slides further. Tight range is expected from US$16.80 to US$17.80 per ounce for the time being while most attention will be focused in the gold trend.