Middle East Tension Escalates Amid Tanker Sabotage
- 17 June 2019
Fundamental Outlook The U.S. Secretary of Finance Mnuchin cites President Trump will be happy to impose more tariff on Chinese goods if no further deal is reached with Chinese leaders. Trump also threatens that more tariffs will be imposed on Chinese imports if Chinese President Xi does not attend the G20 meeting.
Trump complains the devalued currencies in major counterparts have put U.S. trade at disadvantage and FED policymakers do not have a clue to it. Traders expect the coming FOMC on this Wednesday may be status-quo but rate cut may surface in coming months.
On Friday, President Trump changed his comment and downplayed the threats on China by saying it doesn’t really matter if he can meet Chinese President Xi in G20 meeting.
China trade surplus added USD41.7 billion in May and higher than forecast. Till date, China is reserving all replies towards U.S. threats. Market investors are observing the Dollar trend as a leading catalyst to move Gold prices now.
British GDP fell 0.4 percent in April on monthly basis. Boris Johnson wins first round of leadership vote in U.K. cabinet and has been favored to be the next Prime Minister by the Conservative Party. Luxembourg Prime Minister Xavier Bettel comments there will no-deal BREXIT regardless who becomes the next British PM.
A Japanese dual oil-tanker was attacked in Gulf of Oman on last Thursday while Japanese Prime Minister Abe visited Iran. Trump administration blames the torpedo sabotage on Iran but has been wholly denied by Iranian Government. The tension escalates in Middles East as Gulf countries suspect the work of Iranian naval force. However, the surviving seamen from the oil tanker say the ship was hit by a projectile but not the torpedo.
Technical Forecast USD/JPY traded in narrow range last week while hovering around 108.50 level. This week, traders will be watching the FOMC outcome for a potential Dollar movement relatively to Yen. Technically, we reckon the initial range to be 107.50 – 109.00 region while waiting to break in either direction.
EUR/USD has topped off recent high at 1.1350 level and closed at 1.1200 area on Friday. This week, we forecast range trading will persist in market from 1.1150 – 1.1300 region until we see a clearer directional headway in Dollar policy. Eurozone is beginning to sink into sovereign debt matter as Italy is resolving its debt repayment with the EU policymakers.
GBP/USD has resumed into bear trend last week as investors are beginning to retreat from U.K. investment. Pound may take a fall in coming weeks due to waning confidence in market. This week, we forecast the trend will be initially trapped inside 1.2550 – 1.2700 region until it extends beyond in either direction. In our opinion, breaking beneath 1.2550 support could be detrimental to the demand in Pound.
Gold prices touched 14-month high at USD1358 /oz last week and retreated. This week, the trend might travel in either direction based on the outcome of FOMC meeting. Initial range is expected from USD1330 – 1360 /oz but breaking in either direction will lead a new directional force in strong momentum. Risk control is advised in case of adversity.
WTI Crude prices have stood above USD50.80 /barrel as firm support. Demand begins to build up due to Middle East tension. This week, we presume the range will be contained from USD50.50 – USD54.00 /barrel while still trapped in sideways trading. Basically, market is not ready for recovery since fund is still engaged in Gold instrument.
Silver prices shaved off the bullish sentiment on Friday after Dollar climbed. This week, we reckon the market will trade in narrow sideways from USD14.60 – USD15.10 /oz in mixed trading actions. We are still optimistic to pick bottom in caution whenever the trend prices fall below USD15.00 /oz level.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives has been trading in low demand for months. FCPO lingered at RM2000 /MT last week as Ringgit traded in weak demand. August19 Futures closed at RM2008 /MT on Friday and will rollover to September19 in coming week. Technically, we predict the range will trade narrowly from RM1950 – RM2050 /MT this week amid whipsaw movement.
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