NFP jobs data fires up the market, UK re-affirms threat of ‘no-deal’ Brexit

Market Recap

Global equity market

(Source: KVB PRIME)

The US shares market kept droppingon Friday- the NASQDAQ led again, dropping 1.27% to 11622.13, while the S&P500 fell 0.81% to 3426.96 and the Dow Jones closed down by 0.56%at 28133.31. The NASDAQ has dropped more than 3%over the last four trading days.

Europe’s market behaved similarly, with the DAX falling 1.65% to 12842.66, while the FTSE decreased by 0.89%to 5799.08.

Meanwhile, the Chinese market opened low and went lower; the Shanghai Stock index closed down by 0.87%, while SZSE Component Index fell 0.84% and the GEM index lost around 0.54%.

The Semiconductor sector climbed back against the market by approximately 4%, while the lithography and chip sectors increased by 2%. The Food, wine, medicine and coal sectors were among those industries leading the intraday drop.

Precious metal forward contracts

Gold fluctuated up and down on Friday. After the Nonfarm payrolls (NFP) data was announced, the price hitdaily highsof $1947 and then dropped back by $30 to around $1920.

The price partially recoveredlater in the session and closed up by 0.32% at $1932 per ounce.

The silver price approached$27 on Friday, but ultimately closed slightly lower at $26.9 by 1.19% increase.

Oil forward contracts

Both oils went lower during the last session - WTI oil fell below $40 (with a 4.45% price drop)to$39.42, while Brent oil was also weaker, closing at $42.32 after a 3.77% fall.

Currency pairs

·        USDX down to92.77 (-0.043%)

·        EUR/USDdown to1.18395 (-0.087%)

·        GBP/USDup to1.32785 (0.027%)

·        AUD/USD up to 0.72881 (0.245%)

·        NZD/USDup to0.67198 (0.197%)

·        USD/CADdown to1.30549 (-0.525%)

·        USD/JPYup to106.236 (0.091%)

Global Fundamentals

United States

NFP increased by 1.37 million in August and the unemployment rate eased to 8.4% as the US economy continues to climb its way out of the lockdown-led downturn. The US unemployment rate was 8.4% for August - down from 10.2% in July– beating initial expectations of 9.8%.

The Federal Reserve, meanwhile, provided further confidence for investors and stated that it will retain its current stimulating plan or even add further support measures if deemed necessary.

Europe

UK Prime Minister Boris Johnson affirmed that Britain will walk away from the ongoing Brexit negotiations if no deal can be reached by 15th October.

In another sign of potential trouble ahead, sources indicate that Johnson’s government could be planning domestic legislation that would water down commitments to maintaining an open border between the UK’s Northern Ireland and the neighbouring Republic of Ireland, which is still a part of the EU.

The border guarantee was a key part of the legally binding divorce agreement made between Britain and the European bloc last year.

MPC member Michael Saunders noted:

“The economy in June, July and August has benefited from a relatively benign confluence of factors: fiscal support has remained very high, the easing of lockdown has allowed more spending (including pent-up demand), while the lagged effects of lockdown have kept infection rates low and reassured consumers.

“However, even that very limited sweet spot may now be fading.”

Saunders also added he remains cautious and thinks more support could be needed to assist with the recovery.

According to the Financial Times,SoftBank bought billions of dollars’worth of technology company options over the past month, betting on higher prices for the biggest names in tech. This caused a rise in the market, however the momentum ostensibly droppedlast Thursday.

New Zealand

The Reserve Bank of New Zealand (RBNZ) stated it has finalised its monetary policy to aid the economic recovery, which includes negative interest rates for wholesale businesses and funding support from banks.

Crude oil

Saudi Arabia cutoil prices for Asian and US customers for its October shipments, a sign that the world’s biggest exporter may see fuel demand wavering amid regional flare-ups of the coronavirus.

It is also reducing October prices for Asian shipments of light-grade petroleum by $1.40 a barrel, to $0.50 below the regional benchmark.

The company was originally expected to pare pricing by $1 a barrelto a $0.10 discount, according to a Bloomberg survey of eight traders and refiners.

Today’s major assetanalysis

EUR/USD

After the NFPfigures were released, market prices experienced big rises and falls. Our strategy from 1.182 to 1.180 was realised with a 50-pip profit margin. The price climbed back to 1.184 afterwards.

Nevertheless, this will not affect our mid-term placement for shorting the Euro andpound as they are currently supported by strong fundamentals, namely no agreement on Brexit.

Technically, the price is also below thetwo moving averages; our current target is 1.175.  

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

AUD/USD

As we expected, the Australian dollar climbed back to 0.7285 and then followed up with a 45-pip fall. Even missing the close position at this point, mid to long term shorting of the AUD is still our main strategy.

All the long and durable orders will be settled early and by the middle of this month. By that time, commodity prices will likely not support future AUD prices at current level. Our short-term target is 0.723.  

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

Gold

The gold price followed our layout back near to $1950 at $1948, and fell afterwards. We still would like to hold gold for another $7.

Based on last week’s price data, its daily price average is $34.7. Therefore, a short-term plan targeting $7.2 would be ideal intraday.

Currently, mid and long term placementsare not recommended for gold.

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

USD Index

Last week, we grabbed a $0.46 margin space from the USDX. In the short term, we still hold a positive attitude towards the USDX and should target $93.

Due to the NFP release, many traders who were longing the USDX took their profit and exited the market; similar activity happened to all the other major currency pairs.

Please note that long positions may face increasing pressure, so our profit margin is not likely to be large for now and traders are advised to revise their expectations accordingly.

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