Investors brace for gloomy US GDP figures, hurricane continues to affect the market

Market Recap

Global equity market

(Source: KVB PRIME)

In the US stock market, manufacturing is still weak and high-tech venture capital is beginning to exert force. The Dow Jones rose 0.3% to 28,331.92, the NASDAQrose 2.13% to 11971.94and the S&P 500 rose 1.02% to 3,478.73.

As a whole, the gold and silver sectors recovered, while aviation stocks and energy remainedweak.

European stock markets closed up across the board: the German DAX index rose 0.98% to 13190.15and the UK FTSE 100 index rose 0.14% to 6045.6.

The three major A-share indices fluctuated and declined. The Shanghai Stock Index fell 1.3%, the Shenzhen Component Index fell 1.76% and the ChiNext Index fell 2.13%.

Shenwan's 28 primary industries fell almost in unison - led by the electronics, military and non-ferrous metal sectors - and the concept of environmental protection went up against the trend. Only four of the first 18 new stocks under the GEM registration system closed up and about 3,200 shares across the two cities fell.

Meanwhile, WTI crude oil fluctuated slightly between $43.2-43.4 during the day. During the European session, it fell below the daily low of $43.2.

After the opening of the US market, it rose rapidly to a daily high of $43.75 and then fell back, finally closing up by 0.21% at $43.44 per barrel.

Brent crude oil closed down by 0.5% at $43.78 per barrel.

Precious metal forward contracts

Gold fluctuated lower throughout the day on Wednesday, falling from around $1930, hitting a minimum of $1902.55 at around 20:30 in the evening and then quickly rising, finally closing up 1.32% at $1954.63 per ounce.

There has also been a significant increase in the trading volume of gold futures in the US market: COMEX's most active gold futures contract has a trading volume of 4621 hands within three minutes from 22:32-22:34 Beijing time, amassing a total trading value of nearly $900 million.

Silver broke the $27 mark and closed up 3.53% at $27.46 per ounce.

Crude oil forward contracts

WTI crude oil fluctuated slightly between $43.2-43.4 during the day and fell below the daily low of $43.2 during the European session.

After the opening of the US market, it quickly rose to a daily high of $43.75 then fell back. It finally closed up by 0.21% at US$43.44 per barrel.

Brent crude oil closed down by 0.5% at $45.78 per barrel.

Currency forward contracts

·        USDX down to 92.88 (-0.108%)

·        EUR/USD down to 1.18281 (-0.045%)

·        GBP/USD up to 1.3205 (0.449%)

·        AUD/USD up to 0.72312 (0.532%)

·        NZD/USD up to 0.66159 (1.062%)

·        USD/CAD up to 1.31707 (0.005%)

·        USD/JPY down to 105.987 (-0.370%)

Global Fundamentals

United States

The Federal Reserve finalised the officialdetails of its bank capital allocation, community bank leverage ratios, and current expected credit loss (CECL) rules, which are said to be‘essentially similar’ to those passed in March but impose ‘more gradual’ restrictions on capital allocation.

On Wednesday, the US Securities and Exchange Commission (SEC) voted to relax regulations on the company’s business, legal procedures and risk factor disclosure, which are poised totake effect in 30 days.

In addition, the SEC has also expanded its definition of ‘qualified investors’ to include individuals and some institutional investors with professional knowledge, which will take effect 60 days from yesterday’s announcement date.

Statistics indicate that the COVID-19 pandemic is expected to cause a 23% reduction in new car sales in the US for 2020.

Europe

According to foreign media reports, Germany will use the aid funds it receives in the EU Recovery Fund to control the growth of new debt, rather than funding new growth plans; Chancellor Angela Merkel’s coalition party reached an agreement on Tuesday on the receipt of financial aid from the EU.

Approximately 15 billion euros ($18bn) were spent on the current economic plan; individualsfamiliar with the matter said this shows that the German Government is attempting a returnto the tradition of budgetary discipline.

The Organization for Economic Cooperation and Development (OECD) stated that, due to the impact of the COVID-19 virus, the economies of its member states experienced an unprecedented decline in the second quarter, far exceeding the 2.3% decline in the first quarter of 2009, which was the worst period after the outbreak of the 2008 global financial crisis (GFC).

The communique pointed out that among the seven major developed economies, the British economy fell by 20.4%, which was the most significant decline.

Crude oil

According to Petro-Logistics, an oil transportation consulting company, OPEC’s August oil supply will only increase by 180,000 barrels per day, while Saudi Arabia’s supply will be below nine million barrels per day. In addition, the Saudi Bureau of Statistics stated that the total value of Saudi oil exports in June fell by 32.601 billion rials, a drop of 54.8%.

During the week ending 21^st August, US EIA crude oil inventories decreased by 4.689 million barrels, which was higher than market’s expectations of 3.694 million barrels and the previous value of 1.632 million barrels.

This has been the fifth consecutive week of decline in US crude oil inventories. Data shows that the strategic oil reserves were reduced by 1.8 million barrels last week. In the first three weeks of August, strategic oil reserves decreased by 6.7 million barrels, while they increased by 21.2 million barrels from April to July.

Today's currency forecast

Risk warning: pay attention tonight, as the announcement of the second quarter US GDP is expected to be lower than the previous value – as a result, today's activities require strict risk control.

EUR/USD

Yesterday, the Euro still didn’tsee a significant drop in the European trading range and did not reach our target of 1.175.

After that, the US price returned to near the weekly average. The overall thinking for Euro trading remains unchanged from yesterday.

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

GBP/USD

The pound did not weaken as expected yesterday;after the update regarding the progress of the trade agreement between Britain and Japan, the GBP was very strong during the European market. After that, the USD continued to rise after weakening in the US trading hours.

As far as the technical aspect is concerned, today's strategy needs to be adjusted to focus on callbacks. Today's Asian and European sessions can target around 1.3158.

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

USD/JPY

During the North American session yesterday, mortgage interest rates dropped but the number of applications alsodeclined. At the same time, mortgage refinancing also fell by more than 10%.

Combined with the hurricane natural disaster - even if the durable goods order data was better than expected - the USD remained weak as a whole. Although we received 70 pips of profit before, currently only 20 pips remain, it is recommended to lighten up or leave the market.

The current price is slightly below both of the moving averages, but both ofthese are still arranged in long positions. It is not recommended to participate in the market until the hurricane losses are properly accounted for.

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

Gold

Yesterday, as we expected, gold counterattacked to around 1950. If you follow the layout of our $10 plan, you mayget two chances to participate.

However, we don't think that the large capital investors have begun to return to the market. It is still bearish to around 1900 intraday. Today, the overall trend will be mainly a callback and the target is 1930.

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

USD Index

Followingour analysis of theUSD/JPY pair, it showed that the USD has received two major fundamentals that are unfavorable and haveturned it weak. From two of the USDX’s major components, the index has been further suppressed by the trade agreement between the UK and Japan.

However, the current fundamentals will not lead to a medium-term trend, and they are still optimistic about the USDX.

Today, the short-term correction could be around 92.98-93. Note that tonight the US GDP forthe second quarter is expected to be less than the previous value, so caution is advised.

[USDX, four-hour chart] (Source: KVB PRIME)