U.K. Requests for a Third Extension to BREXIT
- 28 October 2019
CURRENCY MARKET OBSERVATIONS – 28 October 2019
Fundamental Outlook The U.S. trade representatives says they are making effort with Chinese counterparts to almost reaching the completion of phase one deal. The S&P 500 Index closed at 3022 and almost near to the historical high 3028 dated 26 July this year.
European Central Bank President Draghi bids farewell to Frankfurt after 8 years in office. European Central Bank has left a legacy during Draghi’s tenure as head of central bank and shape up the Euro amid strong headwind of economic challenges. On last Thursday meeting, policymakers keep the monetary policy unchanged.
U.K. Parliament has voted for a rejection to the bill presented by PM Johnson on BREXIT matter. Johnson has threatened to scrap the bill and go for an emergency General Election on 12 December. Extension has been requested for a third time for BREXIT towards next March.
On the other hand, EU leaders have agreed on the deferment of deadline but still reserve in giving the finalized date for coming extension. Pound has fallen off its 5-month high from 1.3000 benchmark.
Technical Forecast USD/JPY traded in tight range around 108.50 region last week. Technically, the market is strongly resisted at 109.00 level that is confluent to EMA200 line. This week, we presume the trend will consolidate in tight range 108.00 – 109.00 region until it breaks in either directional headway. There is no clue for the headway due to much uncertainty in market volatility.
EUR/USD has begun to make correction after it fails to pierce above 1.1200 level. This week, we predict the drawdown will be countered at 1.1000 while overall range will be contained from 1.1000 – 1.1200 region. Price swings are expected to emerge in market unless we could see a lead trend in Dollar direction that moves inversely to Euro trend.
GBP/USD is moving into drawdown correction while strong resistance emerges at 1.3000 level. Literally, we foresee the corrective range will be contained from 1.2750 – 1.3000 region this week. Mixed trading is expected as traders are observing the versatile changes in U.K. fundamentals. Therefore, swing trading is advised with proper control.
Gold prices traded above USD1500 /oz benchmark last week but unable to clear above USD1520 /oz resistance. This week, we remain conservative to our forecast as U.S. stocks might return to strong bullish trend. Therefore, we are uncertain if the two markets will be inversely correlated or in tandem depending on Dollar strength. Technically, the trend may head down and trade in USD1475 – USD1500 /oz range; or move in USD1500 – USD1525 /oz region.
WTI Crude prices traded in rising demand last week after consolidated for past two weeks. Moving forward, we forecast the support will lie at USD55 /barrel and push the prices higher. This week, breaking above the USD57.50 /barrel has potential to reach USD60 /barrel again. Theoretically, a rise in U.S. stock index and Crude prices could be moving up together if Dollar begins to fall faster due to positive outcome of U.S. – China trade agreement.
Silver prices have risen from USD17.50 /oz and built a strong support at this area. This week, we target some consolidation in market movement while resistance will emerge at USD18.50 /oz level. In overall, we reckon the trend may be prone to some liquidations as trading activities might be capped beneath USD18.00 /oz.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives hit 16-month high before the weekend after export rose. Bargain-hunters are returning to market waiting for price retracement. January20 Futures contract closed at RM2398 /MT on Friday after reaching intraday high RM2460 /MT level. This week, we expect some profit-taking activities will emerge and the trend trades from RM2340 – RM2440 /MT region. Volatile trend is expected throughout the week.
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