ECB warns of rising corporate debt in the EU

Fundamental perspectives

The European Central Bank (ECB) has raised concerns about the growing corporate debt burden among major euro area service sectors, as this could increase pressure on governments and lenders in those countries. The current stimulus is issuing a 1.85 trillion euro package for the purchase of bonds and is expected to continue until March 2022.

Unemployment claims in the United States for the week ending May 22 fell to 444,000, the lowest since March 2020. Stock markets soared and fluctuated last week amid concerns over a new corporate tax and reducing the activities of decision-makers.

China’s industrial production rose 9.8 percent in April from a year-on-year comparison, but lower than the 14.1 percent gains recorded the month before. China’s resumption of economic growth is still fluctuating in the wake of the Covid-19 pandemic.

Bitcoin and other cryptocurrencies fell last week after China announced a crackdown on mining and trading behavior on the mainland. On Friday, the Dow benchmark gained 123 points and closed at 34,207 after the fund sought in the stock markets.

Technical forecasts

The US dollar / Japanese yen moved in a slightly weak trend last week with support emerging at 108.50. This week, we expect the trend to remain stagnant and be between 108.50 and 109.50. Low volatility is expected, but traders should be careful in case the market movement crosses the aforementioned range.

The Euro / US dollar showed strong resistance at 1.223 last week. The market is inclined to trade lower this week if resistance can remain intact. We expect a small range of 1.21 to 1.223 unless the dollar breaks this range which could affect the trend of the euro.

The British pound / US dollar broke through 1.42 on Friday. We expect strong resistance at 1.42 but it is prone to a downside. We expect the declines to drop to 1.40 as a first target. Risk management is recommended in the event of an unexpected market movement.

WTI crude prices stood at US $ 62 per barrel after the market fell US $ 66 per barrel last week. The trend could be contained from US $ 62 to US $ 66 per barrel with strong support below US $ 62 per barrel. A breakthrough in the market is unlikely.

Bursa’s crude palm oil futures (FCPO) have entered a correction after the postponement in August. Regional demand for edible oil has temporarily slowed due to price pressure in the commodity market.

The August futures contract stood at RM 3,991 per metric tonne on Friday. The market will likely continue to correct with some sell-off in the market. The overall range is expected from RM 3,800 to RM 4,400 per metric ton.

Gold prices attempted to hit over US $ 1,880 an ounce on Friday and closed lower. We estimated the range could be contained within US $ 1,850 to US $ 1,900 per ounce on consolidation.

Traders can see a swing movement in the market as traders adjust their positions in blended trading. A breach above US $ 1,900 per ounce is unlikely to occur in May, but this possible uptrend could reach US $ 1,960 per ounce a little later.

Silver prices showed some resistance at US $ 28.30 an ounce last week. The market trend could move towards a sideways swing of US $ 27 to US $ 28.50 per ounce. Only the breach of the aforementioned resistance could reach US $ 30 per ounce in the near future. Traders should remain cautious and patient during this period of consolidation.

Dar Wong has over 30 years of trading and hedging experience in global financial markets. The opinion is only his. It can be reached at [email protected]

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