Precious metals and energy commodities were riding the tail winds of a sinking US dollar amid a new wave of sanctions on Iran. Following original sanctions and the non-extension of an oil export waiver earlier this year, the US is planning to announce more sanctions against Iran in an attempt to suppress its nuclear weapons plan.
Escalating tensions were catalysed by oil tanker attacks near the Persian Gulf, which the White House blamed Iran for.
Brent and WTI crude prices had a decent rebound last week, and the rally will find itself some support from geopolitical tensions, a softening dollar and an upcoming OPEC+ meeting on output cut extension. Technically, Brent oil cash has come to an immediate resistance at US$ 65.8. Breaking out above this level will open room for more upside towards US$ 69.5-70.0 area, which is a more significant resistance level.
Gold prices surged beyond its 100% Fibonacci Extension level of US$ 1,393 and traded at US$ 1,406 this morning. The next resistance levels can be found at US$ 1,413 (127.2%) and US$ 1,438 (161.8%). Its trend remains firmly bullish, as suggested by an upward-sloping 10-Day SMA and SuperTrend (10,2). Momentum indicators DMI and RSI, however, have shown early signs of overbought. Some technical pullback in the days to come is possible.
This week is full of events, with the G20, an RBNZ rate decision and the US 1Q GDP final readings on top of the agenda. In Asia, Indonesian trade figures, Singapore CPI, Taiwan industrial production and unemployment reports were in focus.
Traders should be aware and cautious about the G20 outcome, in particular the progression of the US-China trade talks. The likelihood of the two leaders to strike a meaningful deal during the G20 is low, and the most likely outcome is a ‘no deal, no escalation but trade talk continues’ situation. Be prepared for some market bouncing ups and downs before and after this weekend. The smooth ‘one-way’ rally in equities and risk currencies we saw last week might not repeat in the near future.
In Singapore, the Straits Times Index has reached a technical resistance at around 3,316 points, which may encourage some profit-taking activities. Sentiment will likely turn cautious ahead of the G20 meeting. And it won’t take long for investors to find out that recent strengthening in the SGD against the USD will further dampen local exports, manufacturing and the tourism sector. Therefore, a Fed interest rate cut might not necessarily be a good thing for the local market, if the Monetary Authority of Singapore take no action to match a broad-based easing monetary policy adopted by other economies.
Crude Oil Brent - Cash
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