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 Nur Aisha Abd. Wahab
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 The Borneo Post
 US-China tension intensifies

The Borneo Post (18/05/2020) - PRESIDENT Donald Trump threatened to cut all ties with China over matters concerning the Coronavirus Disease 2019 (Covid-19). He said this could save severing US’ ties with China would save US$500 billion if Washington “cut off” the bilateral relationship.

China responded by urging US to meet it halfway and strengthen cooperation in the fight against the Covid-19 pandemic. US consumer prices fell 0.8 per cent in April on a monthly comparison. Excluding fresh food and energies, core prices slid 0.4 per cent, the worst data since 1957.

Filings for jobless claims for the week ended May 9 was reported at 2.981 million, bringing the aggregate number to 36.5 million to date. Federal Reserve chairman Jerome Powell reiterated that policymakers are not considering negative interest rates at this time. However, Trump has been urging Fed officials to welcome negative rates as a solution to stimulate the falling economy.

Crude prices have recovered after the production cut by OPEC+ countries that have taken effect on May 1. Saudi Arabia further stressed on cutting another one million barrels production per day from June 1 onwards, in addition to the current 9.7 million barrels reduction currently.

Technical forecast

US dollar/Japanese yen traded in a narrow range last week as we predicted. We retain our forecast that the trend will be contained from 106 to 108 until the next breakout. There is indication on the direction of the trend at the moment until we see the dollar index (USDX) taking a new headway.

Euro/US dollar displayed strong support at 1.077 and hovered at this region before the weekend. We expect the market movement to be contained from 1.0750 to 1.09 in the coming week.

Just like US dollar/Japanese yen, the euro currency is now waiting for the dollar to take the lead to trigger its next movement. Traders are advised to exercise caution.

British pound/US dollar broke below 1.22 support last week and turned this level into a strong resistance. We expect the market to fall deeper with resistance emerging at 1.22. The immediate psychological support lies at 1.20 but violating beneath this level will drive lower to 1.175. Traders need exercise risk control in case the trend reverses above 1.22.

WTI Crude prices have been approaching US$30 per barrel on Friday. We believe the trend could be well resisted at US$30 per barrel and it would likely drawdown to US$26 per barrel. In case of a persistent uptrend, the next target will be US$34 per barrel.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives climbed higher after the holiday weekend. Recovery was partly due to higher crude prices and growing demand in this commodity. July Futures closed at RM2,089 per MT on Friday. The market trend might consolidate from RM2,050 to RM2,100 per MT initially. However, piercing above the aforementioned resistance will drive demand higher to RM2,200 per MT.

Gold prices reached US$1,752 per ounce on Friday and settled on the high side. There is a high possibility of it trading higher. Inversely, gold or dollar prices will fall in order to push the gold demand into new intra-year high. We expect the support to be firm at US$1,725 per ounce in case of a drawdown. Breaking above the US$1,760 per ounce will likely lead to US$1,800 per ounce benchmark.

Silver prices climbed higher last week as we predicted. The market has yet to reach the US$17 per ounce target. We expect for the topside target to be at US$17.50 to US$18 per ounce if the bulls persist in ascension. Support lies at US$15.80 per ounce and should not be broken to ensure the bullish trend.

Read more at https://www.theborneopost.com/2020/05/18/us-china-tension-intensifies/

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