US markets closed at historical highs

Fundamental outlook

 

ALL triple stock indexes in US markets closed at a historical high on Friday. The Dow settled at 35,819 points, S&P 500 closed at 4,605, and Nasdaq Composite Index settled at 15,498. Investors jumped into the market’s bullish sentiment despite worries of an inflation and the impending tapering programme.

The US economy grew two per cent in 3Q, below expectation.

On Thursday, the European Central Bank (ECB) decided to keep interest rates and its monetary policy stance unchanged despite ongoing inflationary pressures. The inflation in the eurozone hit 3.4 per cent in September, the highest in 13 years. ECB president Christine Lagarde said the rising energy prices, and the recovery in demand and supply bottlenecks are currently pushing up inflation.

On Friday, eurozone inflation rose 4.1 per cent in October, a record high since 2008. However, the euro fell as an offset to the rising dollar after the US markets closed at record highs.

 

Technical forecast

 

US dollar/JPY traded in narrow range and settled at 114.00 on Friday. This week, we foresee the market movement will trade inside the range from 113.50 – 115.00 regions. Most market catalysts will come from the Dollar trend and lead the direction in this market pair.

EUR/US dollar fell on Friday after failed to cross over 1.1700 level. This week, we reckon the trend will be choppy and hard to forecast on the direction. Overall range might be contained from 1.1500 – 1.1650 regions while traders will be caught in mixed sentiment. Caution is advised on proper risk control in case of adversity against your position.

GBP/US dollar failed to conquer above 1.3800 resistance last week and turned down on Friday. This week, we predict the range will encounter some profit-taking activities and contain from 1.3600 – 1.3800 region. Market may engage into swing movements and traders are advised to stay cautious.

WTI Crude prices traded in a small range as we predicted last week. The market performed in a sideways correction and stayed within the range largely from US$81 to US$85 per barrel. We foresee no changes in the market until a possible breakout in November. Traders should remain wary and focus on this trend.

Crude Palm Oil (FCPO) Futures on Bursa Derivatives hit our projected bottom and recovered last week. The market’s sentiments stayed firm while waiting for other edible oils to lead the trend. January Futures contract settled at RM5,023 per metric tonne on Friday.

We target the range to stay within RM4,900 to RM5,100 per metric tonne but the range might pierce above our aforementioned resistance and retest RM5,200 per metric tonne.

Gold prices did not close above US$1,800 per ounce on Friday. The market fund fled out of the gold market after the dollar and US markets soared. We target some profit-taking activities will emerge and also due to book closing activities during the end of the month. The market range is expected to move from US$1,760 to US$1,800 per ounce in mixed sentiment.

Silver prices retreated from US$24.50 per ounce and traded in a weak pattern. We expect the market could remain unchanged in its sentiment with most traders moving out of this market.

We speculate the range to be contained from US$23.50 to US$24.50 per ounce but many bargain-hunters could emerge below US$23.50 per ounce level. Long traders are advised to be patient in this market as November could be another sideways pattern.

 

Dar Wong has more than 30 years of trading and hedging experiences in global financial markets. The opinion is solely his own. He can be reached at dar@alaa.sg.

 

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