Dow Jones Lifts after Powell’s Comments
- 7 January 2019
Fundamental Outlook The Secretary of U.S. Defense Jim Mattis tendered his resignation and supposed to leave Trump administration at end February. Instead, President Trump instructed him to leave 2 months in advance at end December. Generally, market economists are concerned of the erratic and egregious behavior of Trump as no more senior ranked officials is staying in White House.
After the U.S. Government has been shut down before Christmas, the House passed a Bill on Friday to fund 8 Government Departments through September. However, the budget does not include the funding of border wall as proposed by President Trump. It is still unclear now if Trump will approve it or the House could get enough bipartisan votes to override the President’s veto.
The U.S. economy added 312,000 jobs in December and way above median forecast. FED chair Powell comments the policymakers will be patient to tighten rates, quelling fears of rapid rate increment in near future. On Friday, Dow market surged 800 points through the mid-day session.
China announces the cutting of its bank’s reserve requirement ratio (RRR) by 1 percent in January, preparing for economic slowdown and mounting pressure from U.S. tariff. The current RRR for large banks is 14.5 percent and small banks at 12.5 percent.
Technical Forecast USD/JPY took a dip last week to 10-month low at 105.00 as Dollar fell. Market rebound to 108.50 area on Friday and await a clearer trend in coming week. Technically, we reckon the trend has spearheaded into a bear sentiment and will drive lower in coming weeks. This week, resistance will be strong at 109.00 region while first support lies at 107.30 level. The eventual penetration below the support will lead into the next support area at 104.50 – 105.00 region.
EUR/USD has been well contained from 1.1300 – 1.1500 region last week without much erratic movement. This week, we reckon the trend will be prone to test the topside range resistance. However, piercing above 1.1500 level will drive higher to 1.1700 area in due time as Dollar tends to weaken.
GBP/USD is still threading sideways due to much uncertainty in BREXIT negotiation with European Commission. This week, we foresee little change in market movement from 1.2500 – 1.2800 range. The trend will be prone to test the upside prices but selling pressure is equally strong. In case of unexpected penetration above 1.2800 level, the bulls will attempt 1.3000 as our next target though it may be slim for the time being.
Gold prices reached 1298 /oz on last Friday and retreated. The trend will begin to consolidate for a while due to profit taking and fund will flight to Crude prices for technical recovery. This week, we predict the yellow metal will stay on high prices though it may not pierce above USD1310 /oz benchmark. Technically, we expect the price movement to be contained from USD1270 – USD1310 /oz with many profit takers ambushing on topside of market.
WTI Crude prices has begun to recover with strong support building at USD43 /barrel region. Currently, the trend may still do some sideways consolidation before advancing in coming weeks. Over near term, we foresee the support will be firm at USD45 /barrel while the range is constricted below USD50 /barrel. Weakening Dollar and subsequent correction in Gold will be good lifting factors for Crude prices though we foresee the next resistance will emerge at USD53 /barrel.
Silver prices have started bullish trend while the Gold/Silver ratio has declined from 86.00 to 82.00 level. Moving forward, we expect the Silver prices to climb higher despite slowdown in yellow metal. This week, we forecast the support will lay firm at USD15.50 /oz in case of mild drawdown. Topside potential will aim at USD16.50 /oz if bulls could cross above USD16.00 /oz benchmark.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives recovered last week in mild ascension. Most of the general commodity have reversed higher amid lower Dollar. FCPO is considered a slower recovering commodity compared to soyoil and olein. March contract settled at RM2171 /MT on Friday with moderate trading volume and open-interest. This week, we predict the trend will be sideways from RM 2130 – RM2200 /MT with potential bargain hunting from bottom prices. Price jump is only possible towards end of week or rollover period.
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DAR Wong has 30 years of trading and hedging experiences in global financial markets. He can be reached at www.pwforex.com