Market Recap 08/13

Global equity market:

(Source: KVB PRIME)

The market as a whole moved higher yesterday;the NASDAQ index overcameits weakness this week and closed up by 2.59% at 11157.72.

The S&P 500 and Dow Jones also recovered their lossesfrom the first half of the week, closing up by 1.4% and 1.05% at 3380.35 and 27976.84 respectively.

European stocks

Major European stock indices remain strong -the German DAX index closed up by 0.86% at 13,058.63, while the UK FTSE 100 index closed up by 2.04% at 6280.12.

The Chinese stock market is still undergoing a consolidating decline; the Shanghai stock index fell by more than 2%and the ChiNext index fell by more than 4%.

As of closing, the Shanghai Composite Index fell 0.63%, the Shenzhen Component Index fell 1.17%and the ChiNext Index fell 1.98%.

Precious metal forward contracts

Gold’s downward movement came to an end yesterday;the price fell below $1,870 during the Asian market, however it returned to near $1930 after a correction during the European session. The current price of gold is sitting around $1940.

The situation with spot silver fluctuated similarly - after rising 5% at the beginning of the market, it fell back 5%.

Crude oil forward contracts

International oil prices strengthened on Wednesday as WTI crude rose by more than 3%. The two oils fell back during the US market and then continued to rise.

As of closing, WTI crude oil rose 2.13% to $42.53 per barrel, while Brent rose 1.84% to $45.31 per barrel.

Currency forward contracts

·        USDX down to 93.26 (-0.20%)

·        EUR/USD up to 1.17809 (0.355%)

·        GBP/USDdown to1.30283 (-0.172%)

·        AUD/USDdown to0.71574 (-0.209%)

·        NZD/USDdown to 0.65736 (-0.017%)

·        USD/CADdown to1.32497 (-0.383%)

·        USD/JPY up to 106.845 (0.322%)

Global Fundamentals

United States

US President Donald Trump announced he had reached a vaccine procurement agreement with biotech company Moderna.

The Office of the United States Trade Representative (USTR) stated that they will revise the list of EU product tariffs affected by the aircraft subsidy case. The tariff rate for EU products remains unchanged at 25%, whilethe tariff rate for aircraft is 15%.

The cumulative value of EU products affected by countermeasures remains unchanged at $7.5bn, and the tax rate will also reportedly stay the same. US Trade Representative Robert Lighthizer opined that the EU and its member states have not taken the necessary measures to implement the WTO's ruling on the Airbus subsidy case.

Speaker of the US House of Representatives Nancy Pelosi said that she rejected Treasury Secretary Steven Mnuchin’s proposal to restart a new round of stimulus negotiations because the White House requested a reduction of the scale of the stimulus package and refused to make any concessions on this issue. Pelosi also added that the Republican Partywere not taking the negotiations seriously.

Data released by the US Treasury Department on Wednesday showed that the July budget deficit fell to $63bn from $119.7bn during the same period last year, with a median market estimate of $90bn. The deficit hit a record high of $864.1bnin June.

In July, meanwhile, fiscal revenue increased by 124% year-on-year - reaching the highest level on record - and expenditure increased by nearly 69%, reflecting the added expenses caused by supplementary unemployment relief and small business support measures.

United Kingdom

Preliminary statistics released by the National Bureau of Statistics on 12^thAugust showed that the UK's gross domestic product (GDP) shrank by 20.4% in the second quarter of this year, marking the largest quarterly decline on record.

New Zealand

The Federal Reserve Bank of New Zealand (RBNZ) announced the latest interest rate decision, stating that it will maintain the benchmark interest rate unchanged at 0.25%(in line with market expectations).

In addition, RBNZ said it will raise the upper limit of its large-scale asset purchase programme to $100 billion NZD, compared with the previously agreed $60 billion NZD.

International crude oil

OPEC released the August Crude Oil Market Report, which adjusted the 2020 global crude oil demand growth rate from a drop of 8.95 million barrels per day to a drop of 9.06 million barrels per day.

It is estimated that the global crude oil demand for 2020 will be 90.63 million barrels per day, a decrease of 9.09%from 2019.

 Global crude oil demand is expected to grow byseven million barrels per day in 2021, which is the same as before. Global crude oil demand is expected to be 97.63 million barrels per day in 2021, representing an increase of 7.72% over 2020.

Today's currency forecast

EUR/USD

At the opening of the European session, the Euro continued to decline. After that, the main driving force for its renewedrise came from the US market amid news the talks surrounding a renewed round of fiscal stimulihad seen little progress.

The price received good support around 1.72 as we predicted yesterday – though it is still recommended to wait and observe today. The price will likely continue to consolidate to near 1.1836, and there is little room for participation.

If the price can break firmly around 1.1836, then we need to adjust to placing long positions in the short-term and our target can be set to the previous high.

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

GBP/USD

Yesterday’s short-term shorting strategy grasped 50 pips, but the subsequent trend has been different from the slow pull back we expected. The price shows an observable positive line pull back and our overall strategy needs to be adjusted.

At present, there is only 30 pips of room for participating in the market, so if you want to participate, you will need to adhere to strict risk control. The disappointing UK GDP data is not filling the market with optimism and the overall mid-term strategy is to hold short positionson the pound.

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

USD/JPY

The USD/JPY pair continued to be oversold yesterday;although the Yen’s current market liquidity is increasing, it is not believed that it is currently in excess of the market.

However, it gives us a signal of a good future economy and it also allows us to participate in the callback under strict risk control.

From the current price to around 106.1, a callback short position could be held and the price is not expected to fall sharply.

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

Gold

Gold’s successful ‘escape’ continued until the eve of the European session;after that, the price subtly returned to the position of 38.2% of this current wave of decline, and the dispersion between the price and the weekly moving average was 1.6 standard deviations of the past month’s movement.

Small and mediumsized capital is the market’s main driving force and the price will probably return to its previous level afterwards.

Around 1950, the current vaccine-related fundamentals make it difficult to create a risk sentiment and it will be tricky for prices to break through further at this time.

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