Trade War Resurges in More Conflict
- 3 June 2019
Fundamental Outlook The U.S. GDP grew 3.1 percent in Q1 season. President trump slaps a 5 percent tariff on Mexican imports as a protest action to illegal immigration. The U.S. 10Y Bond yield falls to 19-month low at 2.133 percent.
Last week, President Trump concluded his 4-day trip to Japan and mentioned of a possible deal trade to be finalized in August. Japan’s official downplays the deal and comments Trump has been too eager to achieve a quick progress in negotiation.
China reports the manufacturing index slides in May to 49.4 against the forecast and after it climbed 50.1 in April. On the other hand, President Trump voices China is starting to face economic impact due to effects from trade war. Meanwhile, China importers have halted the purchase of soybeans from U.S. producers.
China has expressed clearly it would not give in to U.S. deal for changing its state-run economy. Besides, China is not prepared to surrender the proprietary technology that U.S. has accused of being stealing from American corporations.
China’s state run media Xinhua agency comments America for bullying other nations will land at lonely state eventually. Former PBoC Governor Dai Xainglong also says the enlargement of trade war will cause global economy to decline, and erupt to another financial crisis.
Italy is on verge of a showdown with EU of ballooning debt and budget deficits. Italy’s deputy PM Matteo Salvini says Rome could be slapped with EUR3 billion fine by EU regulators of failure to control sovereign debt.
Technical Forecast USD/JPY fell on last Friday after Dollar waned. The trend has projected a bearish direction in June and might continue to dip further this week. Technically, market may consolidate from 107.50 – 109.00 range but will slide eventually in near future. Abandon your short-view in case of recovery above 109.00 level.
EUR/USD has exhibited strong support at 1.1120 level and tend to recovery this week. We forecast the trend will reach 1.1250 target for time being and consolidate for a while. Uptrend has been identified in June for crossing above 1.1250 level so long as the trend does not sink below 1.1120 support.
GBP/USD has been trading from 1.2550 – 1.2750 range while prone bias to fall. However, we foresee some buying interest will return to market this week due to the resignation of PM Theresa May. A potential new Prime Minister will replace her and who is a hardcore supporter of BREXIT without any deal needed. Technically, the trend is possible to move in either directional headway once it breaks beyond the aforementioned range.
Gold prices have begun to surge above USD1300 /oz after the Dollar fell. This week, we reckon the trend will be well supported at USD1295 /oz and continue to rise further. Potential range might extend up to USD1325 /oz region before some profit-taking emerges. The recovery has been well predicted by us over past weeks when the opportunity rose in fishing the bottom below USD1280 /oz level.
WTI Crude prices fell last week due to renewed worries of trade war. This week, we foresee the bears will take the trend lower at USD51 /barrel until bargain-hunting emerges. Overall range is expected to move from USD51 – USD56 /barrel. Take note that the potential Dollar fall may benefit the precious metal demand but not the Crude prices for the time being.
Silver prices also has begun to recover but at slower pace after Gold prices. This week, we predict the range will be prone bias to rise but limited to USD14.40 – USD14.80 /oz range. Sentiment is almost unchanged from last week’s analysis.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives traded higher last week as Poland supports the Malaysia Palm Oil as biofuels against EU. August19 Futures closed at RM2071 /MT on Friday. This week, we forecast the trend will be prone to rise higher while contain from RM2040 – 2120 /MT range. In our opinion, FCPO may begin to head for a mid-term recovery for coming months.
DAR Wong has 30 years of trading and hedging experiences in global financial markets. The opinion is solely at his own. He can be reached at firstname.lastname@example.org