Market Recap 08/11

Global equity market:

(Source: KVB PRIME)

US production and infrastructure continued to perform well on Monday: boththe Dow Jones and S&P 500 closed higher, up by 1.3% to 27791.44 and by 0.27% to 3360.47 respectively.

The NASDAQindex remained weak and fell 0.49% to 11085.17. As the Tiktok controversy continues, investor enthusiasm for the emerging technology industry in the US has ostensibly begun to deflate.

European stocks looked more optimistic: the German DAX index closed up by 0.1% at 12,687.53, while British Fuji closed up by 0.31% at 6050.59.

The Chinese stock market generally rose then fell - the Shanghai stock index rose by 0.75% and the highest impact reached 1.3%; the Shenzhen Component Index also rose by 0.06%, but the performance of the ChiNext was still poor, decreasing by 0.53%.

Precious metal forward contracts

Gold continued to fall in price last night -after the price pulled back to near 2050, the bulls' exit price fell below $2030. This morning, it continued to fall to around$2017.

Crude oil forward contracts

International oil prices rose, with WTI crude oil hitting $42 and Brent crude oil edging close to $45. Both oils continued to fall during the North American session. As of closing, WTI crude oil rose 0.9% to $41.94 per barrel, whereas Brent crude oil rose 0.69% to $44.94 per barrel.

Currency forward contracts

·        USDX up to 93.63 (0.06%)

·        EUR/USD down to 1.1737 (-0.414%)

·        GBP/USD up to 1.306682 (0.102%)

·        AUD/USD down to 0.71496 (-0.060%)

·        NZD/USD down to 0.65897 (-0.167%)

·        USD/CAD up to 1.33502 (0.213%)

·        USD/JPY up to 106.907 (0.979%)

Global Fundamentals

United States

US President Trump announced that the current rate of job creation is satisfactory and there is no reason why the economy would grow less than 20% in the third quarter, re-emphasising his eagerness to re-open schools.

The President also noted he was considering lowering capital gains tax and the salary taxes for middle-income families. Shortly after the White House press conference began, President Trump suddenly left the scene under the escort of security personnel due to reports of a ‘shooting’ taking place in the nearby vicinity.

Speaker of the US House of Representatives Nancy Pelosireplied that the President can only postpone the payroll tax, not reduce it or cancel it entirely,while noting that the US Government's finances are already stretched.

Many US governors made speeches complaining that the current executive order is difficult to implement; the Governor of Kentucky suggested that the current executive order is not feasible, while California Governor Gavin Newsom revealed that the Republican’s unemployment benefit plan will cost the heavily populated State of California approximately $700mper week.

Meanwhile, New York State Governor Andrew Cuomo mentioned that the executive order will increase state spending across the state.

US Treasury Secretary Steven Mnuchin stated that there is room for compromise in the negotiations on epidemic assistance. He believes that the Democrats hope to make concessions and it is possible to reach an agreement on the next epidemic relief plan.

Mnuchin also opined thatit seems ridiculous to require the state and local government to provide $1 trillion for aid, though Congress should pass legislation to provide relief in areas where agreements can be reached.

The Federal Reserve announced the capital requirements of a single large bank; the minimum capital requirement is 4.5% and the capital buffer rate is 2.5%. The new capital requirement will be effective from 1^stOctober.

On Monday, NASDAQ and Dubai Gold Commodity Exchange (DGCX) announced that they have signed an important market technology agreement. The plan will see NASDAQ provide DGCX with a complete set of integrated market solutions. The programme includes multi-asset trading and real-time clearing capabilities, pre-trade risk management, market intelligence, market surveillance and quality assurance applications to ensure the integrity of the market.

British-Japanese Relations

Recently, senior British and Japanese officials stated that the two countries have reached substantial agreements on most areas of bilateral trade between Britain and Japan after Brexit, and they will try to finalise the agreement outline before the end of August.

According to reports, Japanese Minister of Foreign Affairs Toshimitsu Motegi said that the two sides agreed to speed up the negotiation process and hoped to reach an agreement outlining the finalarrangementsby the end of August.

Rights and Interests

This year, Wal-Mart became the world's largest company for the seventh consecutive year, Sinopec still ranked second, State Grid rose to third, PetroChina ranked fourthand Shell Oil fell to fifth.

Today's currency forecast:

EUR/USD

While UK has a strong desire to gain a trade cooperation with Japan, the current economic quagmire in Europe seems to offer little hope.

Yesterday, the European Central Bank (ECB) announced that the liquidity of the base currency will increase and the liquidity of the financial currency (generated by financial leverage) will be reduced. In fact, it was admitted from the side that the foundation of the European economy is not in a good state.

Yesterday’s strategy was mainly to wait and observeand todayit remainsthe same: the cooperation between President Trumpand the various functional departments looks to befailing, so we have to judge that the EUR/USD is still in a undesirable stage.

From a technical point of view, if it breaks through 1.172, a mid-term short position strategy will become ourmain focus.

[EUR/USD, four-hour chart] (Source: KVB PRIME)

GBP/USD

Yesterday's callback strategy was able to grasp 40 pips, which is a good result in the short term. The current price has not broken through 50% of the decline since 6^thAugust, and it cannot be said that there has been a clear longing signal at this time.

However, if the price can reach 1.31, we would have more cause for confidence –which combined with the possibility of a UK-Japan trade agreement would suggest along-term bull market.

[GBP/USD, four-hour chart] (Source: KVB PRIME)

USD/JPY

The trend of the USD/JPY is a long arrangement– judging by both of the moving averages - but in terms of the candlestick trend, it is at the top of its current range.

We can still entertainthe idea of ​​waiting until 105.09 to participate, however, based on the relatively strong recent trade agreement between the UK and Japan, as well as the fact thatthe underlying fundamentals of the US market are not solid.

[USD/JPY, four-hour chart] (Source: KVB PRIME)

Gold

The triumphant ‘escape’ of gold did not end as we expected, and the price continued to fall. There was basically no wave in gold before and after the White House shooting yesterday, and when the multi-continental governments issued the statement that the current decree was not implemented, gold still did not move much.

As we have repeatedly emphasised, the driving force for gold is that the capital borrows the topic of risk sentiment to play, rather than risk sentiment driving the price of gold. Large and medium sizedcapitals estimate that the risk of continuing to raise more than $2,000 is too high.

At present, market participants are mainly small capital investors, so the trend will not appear to rise and fall rapidly. The slow adjustment of the decline will be the main trend in the coming period. At present, if the USD breaks down in 2020, a space of $8-$10 could be grasped.

[XAU/USD, four-hour chart] (Source: KVB PRIME)