US Republicans and Democrats fail to reach stimulus agreement, market awaits NFP

Market Recap

Global equity market:

(Source: KVB PRIME)

The S&P500 has risen for the past five days, closing up by 0.64% at 3349.16 yesterday, while the Dow Jones closed up by 0.68% at 27286.98 and the NASDAQ closed up by 1.27% at 11267.08.

Meanwhile, the Europe an market suffered: the DAX dropped by 0.54% to 12591.68, while the FTSE 100 hit 6026.94, representing a 1.27% drop.

China’s share market reconsolidated overall; the Shanghai Composite Index rose 0.26%,while the Shenzhen Component Index closed down by 0.7%and the Chi Next Index decreased 1.6%.

Precious metal forward contracts

Gold refreshed new highs at $2069.4, a 1% increase due to the lack of progress in negotiations between US Republican and Democratic representatives regarding the next stage of the country’s stimulus plan.

Crude oil forward contracts

WTI crude oil price reconsolidated yesterday with a small fall to $41.95 per barrel, totalling a drop of 0.6%.

Brent crude oil also closed down by 0.53% to $43.85 per barrel.

Currency forward contracts

·        USDX down to 92.79(-0.01%)

·        EUR/USD up to 1.18741(0.089%)

·        GBP/USD up to 1.31398  (0.188%)

·        AUD/USD up to 0.72301(0.537%)

·        NZD/USD up to 0.66869  (0.579%)

·        USD/CAD up to 1.33066  (0.288%)

·        USD/JPY down to 105.487(-0.070%)

Global Fundamentals

United States

Speaker of the United States House of Representatives Nancy Pelosi stated that despite little progress being made on the stimulus plan negotiations,there is still a path ahead for an agreement to be finalised. President Donald Trump suggested that he could grant approval to extend the PPP initiative and other current stimulus measures in the meantime.

Last week, the number of unemployment claims fell to 1,186, around 1,000 better than expected,marking a new low since the beginning of the COVID-19 pandemic. According to Challenger, however, the number of employment lay off sremains among the highest in the country’s history, up 576.1% compared to the same time last year.

Microsoft claims the company has no intention of acquiring TikTok’s global business, despite what the Financial Times previously reported. TikTok stated it is currently attempting to split their customers’ data based on region.

Europe

Mark Carney, Chairman of the Bank of England(BoE) noted that the central bank will continue to support the UK economy throughout the rescission. He also encouraged investors to have faith that there will be no tight monetary policies introduced in the short term.

Furthermore, Carney expressed doubts the positive impact that negative interest rates would have on the recovery.

Canada

Canadian Deputy Prime Minister Chrystia Freeland criticised US tariffs on Aluminium products as ‘not reasonable and not acceptable’ and noted that there are neutral benefits for both Canada and the US regarding unimpeded Aluminium trading.

Today's currency forecast

EUR/USD

If we follow up with our strategy and open a long position at 1.1837, now, we should capture a 45-pip profit margin. Tonight, there will be major fundamental data releases from Germany and France - the main drivers of the European economy - followed by the US Non-farm Payrolls (NFP) statistics.

The prediction for the European data is positive, though investors are less optimistic for the NFP release.A mid-term long trading strategy remains valid, first targeting around 1.19.

However, please note there likely will be volatility following the NFP announcement, so implementing proper risk control is especially important. 

(Source: KVB PRIME)

GBP/USD

The price didn’t hit our expected reconciliation mark of 1.309 yesterday,but the major trend was as expected. 

Yesterday’s strategy is still valid based on predictions for tonight’s fundamentals - though again, risk control is required due to the probable deviations during the NFP time frame.

(Source: KVB PRIME)

USD/JPY

The Yen’s price is under pressure from the daily and weekly moving averages - technically, it will be viable to build a short position targeting 105.068 as per yesterday’s analysis.

Due to no table fluctuations at the end of July, the price range has been extended by 9.7%; taking note of this new adjustment range is advised when placing new trades.

(Source: KVB PRIME)

Gold

The price of gold price is still unusually high due to the lack of progress on the US stimulus plan. The price rose as we predicted but hit higher than $2050 by another $20.

Before yesterday’s speech given in the United States House of Representatives, the gold price started to rock and some long traders took their profits and left the market.

A similar scenario might happen again today with a more aggressive trading volume due to impactful fundamentals. As such, participation is not recommended – however,for particularly keen traders, super short placements might be the best option.

(Source: KVB PRIME)