Market Recap 08/20

Global equity market:

(Source: KVB PRIME)

Yesterday, US stocks plunged during the Federal Reserve meeting; the Nasdaq and S&P 500 both fell sharply from their highest positions.

The Dow initially closed down about 80, while the Nasdaq and S&P 500 both fell from record highs. In the end, the Dow Jones fell 0.31% to 278692.88, the S&P fell 0.44% to 3374.85 and the NASDAQ index accelerated downwards 0.71% to 11318.64.

European stocks turned warmer, however, as the German DAX index closed up 0.74% to 12997.33 and the British FTSE 100 index closed up by 0.58% at 611.98.

The three major A-share indexes opened slightly lower and fluctuated downwards. As of closing, the Shanghai Composite Index fell 1.24%, the Shenzhen Component Index fell 2.09% and the ChiNext Index fell 3.27%.

Power, agricultural planting, food and beverage, water conservancy and other sectors were active, whilethe semiconductor, vaccine, duty-free shops, digital currencyand military sectors began to weaken.

Precious metal forward contracts

After breaking through the $2,000 mark on Tuesday, gold was sold through a two-stage decline in capital on Wednesday, and the decline in the US market also increased. The Fed's minutes were less than dovish as expected.

Spot gold fell observablybelow $1,940 and continued to fall during the late trading hours, closing 3.27% lower at $1928.3 per ounce.

Silver was operating below $28 during the day, falling 3.62% to close at $26.31 per ounce.

Currency forward contracts

·        USDX up to 93.06 (0.18%)

·        EUR/USD down to 1.18405 (-0.754%)

·        GBP/USDdown to1.31045 (-1.023%)

·        AUD/USDdown to0.71822 (-0.822%)

·        NZD/USDdown to0.65573 (-0.683%)

·        USD/CAD up to 1.32087 (0.355%)

·        USD/JPY up to 105.97 (0.567%)

Global Fundamentals

United States

The Democratic National Convention (DNC) of the United States opened in Milwaukee, Wisconsin, on 17^Th August with a four-day schedule. On the second day of the conference, the Democratic Party officially nominated former Vice-President Joe Biden as their presidential candidate.

Federal Reserve Richmond Chairman Thomas Barkin said that the shape of the economic recovery curve cannot be predicted, though real-time data shows that the economy is recovering. He also opined that the current unprecedented fiscal and monetary stimulus measures are essential to avoiding even worse economic consequences.

St. Louis Federal Reserve Chairman James Bullard believes that US’ economic growth may be affected by 4% throughout the year, and Congress is expected to introduce a follow-up fiscal plan.

The Commodity Futures Trading Commission (CFTC) is reported to have ordered Scotiabank to pay a record $77.4 million on charges of deception and false statements. Scotiabank will also pay a total of $127.4 million for manipulating gold and silver futures contracts.

The WTO pointed out that - according to the latest readings of its commodity trade barometer - global commodity trading may experience a historical decline in the second quarter of 2020. Other indicators show global trade and output rose slightly in the third quarter, though the outlook remains unknown.

Equity market

Airbnb announced on Wednesday that it has submitted a draft IPO registration to the US Securities and Exchange Commission. The company did not disclose its financial information, nor did it specify how many shares it will issue.

It is reported that Morgan Stanley will lead the public offering, and Goldman Sachs will play a key role. Airbnb originally expected to go public at the beginning of this year, but shelved its listing plan due to the COVID-19 outbreak.

Apple's intraday market value exceeded $2 trillion and its share price hit a highest record. It took only two years to double its market value;Apple first exceed $1 trillion in August 2018. The company is also the first American entityto possess a market value of more than $2 trillion, and its stock price has risen by 59% during the year.

According to US media reports, TikTok US employees have revealed plans to sue the Trump administration and are ready to challenge the government’s ban on the popular TikTok app. Later this week, they will reportedly file a lawsuit to the federal court.

Middle East

According to market news, the Tepp administration is considering increasing sanctions on Venezuelan oil in order to ban fuel transactions in the country. Experts said that these measures may target Venezuela's crude oil swap agreements with Asian and European companies.

According to the latest news, US President Donald Trump stated that he is instructing Secretary of State Mike Pompeo to notify the UN that the US intends to restore sanctions on Iran. The US State Department noted that the sanctions against Iran will include a ban on uranium enrichment activities and an extension of the arms embargo for another 13 years.

Senior US Government officials said that American companies plan to announce a major investment agreement with Iraq during the Iraqi Prime Minister’s visit on Thursday.

US and Iraqi officials have previously talked about bilateral energy partnerships and representatives stated thatthe two countries have been cooperating on energy for some time.

Crude oil

In the week ending 14^th August, EIA crude oil inventories were announced, which revealed a decrease of 1.632 million barrels to 512.5 million barrels, marking a dropof 0.3%.

In terms of crude oil imports and exports, US crude oil exports fell by 1.006 million barrels per day to 2.137 million barrels per day last week. In terms of production, the US' domestic crude oil production remained unchanged last weekat 10.7 million barrels per day.

Today's currency forecast

EUR/USD

Yesterday’s callback strategy targetingaround 1.189 gained a 70-pips profit margin, but we were not able to grasp the 50-pipspace afterwards. From the current 1.184 upward movementduring the Asian and European morning hours, there is a high probability of a 30-pip callback.

However, the latest Fed minutes were 'hawkish' in nature, so the probability of the price continuing to remain activeafterwards is relatively high. The wisest strategy looks to be to pull back and continue to short, but note that there will be no sharp decline in the market after the pull back.

We need more time to obtain the corresponding profit - the space below looks set to reach 1.18 in the near term.

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

GBP/USD

The overall mid-term outlookof for the pound has turned bearish. Although yesterday’s correction of 1.319 followed by a move to 1.316 could obtain a space of 70 to 100 pips respectively (in quick succession), the sharp decline in prices is not what we expected.

After this sharp drop, the market looks set to continue to fall. The profit margin from around 1.31 to the weekly average is small, but if the price return is minor, traders can continue to lay out short positions.

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

USD/JPY

Our callback strategy and price predictions were accurate, capturingaround 80pips. Currently, there is a high possibility that the price will climb with small candlesticks - but the price margin is not substantial for the price range, so participation is not recommended today.

If the price can firmly break support:106.3, we could then see about chasing highs - thoughuntil that happens, observation is recommended.

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

Gold

The Fed's minutes seem to be the main driver of yesterday gold price. Gold fell by 4.28%, while the USDX only fellby 0.14% and other major assetprices towards USD were changed by no more than 1.05%.

It is easy to observe that medium and small sized investors had run away from gold market. Indeed, small capital will likely keep leaving the market with price further reconsolidation.

The price might climb back to 1950 shortly, but participation is not recommended for now.  #90USDBonus#

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