US employment figures worsen, oil prices remain steady

Market Recap

Global Equity market

(Source: KVB PRIME)

Global Equity market

US stock markets opened low and went high -the Dow Jones closed up by 0.17% at 27739.73,the NASDAQ index continued to strengthen(closing up by 1.4% at 11477.05) – marking new highs – and the S&P 500 closed up by 0.32% at 3385.51.

Technology,microchip, gold and blockchain stocks kept climbing.

Currently, the Europeanstock market shows a negative correlation with that of the US - the DAX dropped 1.14% at 12830, while the FTSE closed down 1.61% at 6013.34.

Meanwhile, the Chinese stock market opened low and went even lower. The Shanghai Composite Index decreased by 0.36%, the Shenzhen Component Index lost 0.19% and the ChiNext deep Index dropped by 0.96%.

Blockchain, gaming and travel stocks fought against market, while agricultural planting, national defence and wine stocks performed weakly.

Precious metal forward contracts

Gold’s ‘two-stage fall’ is coming to a stage end as we mentioned yesterday; prices went flat between $1925-1950. At the end of the trading day, gold closed up 0.96% at $1946.83.

Sliver prices went high with some reconsolidation, back to$27 with a 3% increase; silver closed up 3.57% at $27.25.

Crude oil forward contracts

Global oil prices acted abnormal yesterday with small fluctuations, but the story changed when the US market opened as the price fell from highs but then climbed back quickly. WTI oil dropped by 2% but recovered partly to close at $42.74 per barrel- a 0.01% rise.

Brent oil fell 0.73% to $44.84 barrel.

Currency forward contracts

·        USDXdown to92.67(-0.14%)

·        EUR/USD up to1.18588 (0.166%)

·        GBP/USDup to1.32129 (0.816%)

·        AUD/USD up to0.71892 (0.099%)

·        NZD/USDup to0.65317 (0.407%)

·        USD/CADdown to1.31801(-0.237%)

·        USD/JPYdown to105.768 (-0.259%)

Global Fundamentals

United States

The US announced the number of unemployment allowance applicants across the country for last week, which were1.106 million higher than the expected 0.925 million. The number stand above one million again after two weeks of decline, indicating the current employment market did meet expectations. A new wave of COVID-19 forced some states to lock down again or delay their recover plans.

Federal Reserve statistics show that up until 19th August2020, the Fed loan balance increased to $472m from last week’s $226m. Q3 business bonds had alsoaccumulated to $700m from 13th to the 19th, and the Fed purchased $24bn in loan bonds.

The US Internal Revenue Service (IRS) predicted that the employment situation may not rebound fully for several yearsdue to the effects of COVID-19. It also stated that the number of employment positions available on the market might be 22.94 billion less than pre-pandemic estimates.

Europe

The central banks of Europe, the UK, Japan and Switzerland stated that they will decrease the frequency of their USD liquidation processes from three times to once per week. USD 84-DAY will be liquated once every week.

Both of these new schedules will come into effect from 1^stSeptember to ensure market sustainability.

Middle East

According to overseas media reports, the US has officially notified the UN of its intention to enforce sanctions on Iran. UN alliances are not in the agreement with the US. 

Michael Richard, United States Secretary, has submitted a letter to the UN and claims Iran didn’t fulfill its obligations(previously agreed in 2015) even after the US and its alliesspent considerable time and effort on diplomatic activities with Iran.

Global Oil

The latest OPEC report stated three predictions:a stronger wave of COVID-19 will hurt the market,contributing further to theslow economic recovery and less oil demand; there will be a supply drop of 1.12 million barrels in 2020, while Q4 storage will climb to 233million barrels more than the last five years’ average; and that the 2021 storage level will be 250 million barrels more than last five years’ average.

Today's currency forecast

EUR/USD

The Euro’s price followed our strategy yesterday.; the shared currency acted quiet when US unemployment allowance data was announced. There might be another 20 pips for further reconsolidation intraday.

However, the profit margin is small, so participation is not recommended. If the price climbs back to 1.1879, short-term short positions would be preferred. 

Please note we currently need to wait to obtain a greater profit margin.

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

GBP/USD

Yesterday, four central banks decreased their USD liquidation frequency from three times to once per week to deal with excess USD liquidity. 

The price was initially following our strategy and coming back towards the week’s average -as the news was announced, the price broke through the resistance further and achieved an 88-pip daily high.

Now, the pound looks set to strengthen and the short-term strategy will be to place long positions. Opening long positions over 1.317 will be our primary move, even though there would likely be a small reconsolidation. 

We should be aware that the price could drop as soon as extra USD liquidity exits the market.

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

USD/JPY

The Yendidn’t stand above 106.1 yesterday, instead starting to reconsolidate down, forming a triangle reconsolidation pattern.

The momentum will be remarkable after the price breaks through the triangle pattern. Based on current fundamentals, it is highly possible the dollarwill experience a further drop, andparticipation before the break through is not recommended. 

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

 Gold

As our predication stated, the price drew back to $1950. The gold price acted peacefully when the number of unemployment allowance applicants was revealed as more than expected.

As we explained in yesterday’s livecast, without major capital participating the market, the gold price fluctuation will probably be relatively small.

Most investors will keep observing until the next notable ‘risk event’. Recently, the price has kept reconsolidating, heading downwards towards $1900.

Intraday, our strategy will be to shortaround the S10 range.

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