Commodity prices supported by China’s recovery, President Trump hints at COVID-19 virus breakthrough

Global equity market

(Source: KVB PRIME)

Supported by various fundamentals, the share markets became warmer yesterday - the S&P500 rose 0.52% to 3401.2; the NASDAQ closed up by 1.43% at 11438.87 and the Dow Jones closed slightly higher(by 0.01%) at 27995.6.

The same situation happened in Europe; the DAX closed up by 0.18% at 13217.37, while theFTSEclosed up by 1.32% at 6105.54.

Meanwhile, the Chinese markets reconsolidated upwards as they had the day before – the Shanghai Stock index closed up 0.51%, the SZSE Component Index increased 0.93% and GEM index recovered 0.88%. Despite this, the gold and silver sectorsdepreciated.

Precious metal forward contracts

Gold returned to $1970 but the price drew back during the North American session, ultimately closing down by 0.19% at $1952.95 per ounce.

The silver price reconsolidated back 0.02% to $27.13 per ounce.

Crude oil forwardcontracts

The WTI price initially reconsolidated from $37.1 to $37.4. During the European trading hours, the price came back to $38 before dropping once more. WTI climbed again after the US market opened, closing up by 2.94% at $38.4 per barrel.

Brent oil went higher by 2.5% to close at $40.65 per barrel.

Currency pairs

·        USDXdown to93.04(-0.215%)

·        EUR/USDdown to1.18466(-0.003%)

·        GBP/USDup to1.28874(0.320%)

·        AUD/USDup to 0.72981 (0.107%)

·        NZD/USDup to0.67091 (0.112%)

·        USD/CADup to 1.31818 (0.055%)

·        USD/JPYup to 105.409 (0.271%)

Global Fundamentals

United States

The self-proclaimed House Problem Solvers Caucus presented a $1.5trn plan to support the US’ coronavirus-ravaged economy on Tuesday, which included a sum of $0.5trn to support state government finance.

However, given that the previous$1trnstimulus fund –which was announced a month ago - has not yet been enacted,many across the markethold doubts as to how much of (and/or when) this initiative will be delivered.

In other news, US President Donald Trump revealed that acoronavirus vaccine may be ready within four weeks;gold price dropped after the speech took place.

Pharmaceutical company AstraZeneca announced that testing of the vaccine will be resumed in South Africa.

Additionally, the headline General Business Conditions Index of the NY Fed's Empire State Manufacturing Survey improved from 3.7 in August to 17 in September. This reading beat the market’s expectation of 6 by a wide margin.

The New York Fed also said firms remained optimistic that conditions would improve over the next six months, with the index for future business conditions climbing to 40.3 in September from 34.3 in August.

Australia

The Reserve Bank of Australia (RBA) published the minutes from its September meeting:representatives agreed that interest rateswould not rise until employment figures and inflation met the respective targets.

The RBA is also considering purchasing government debt and bonds to ensure market efficiency.

Crudeoil

The International Energy Agency‘s (IEA) August datasuggested that oil demand is likely to slow down in late 2020.

The agency expects 2020 Crude Oil demand to fall by 8.4 million barrels per day in 2020 but rise by 5.5 million barrels per daynext year.

Today’s major assetanalysis

EUR/USD and GBP/USD

Yesterday, ourEuro tradingframework covered 70% of the intraday price movement, except the 18 pips over 1.188.However, even without participation in the 15-pip drawback, a 30-pip reconsolidation towards monthly average could have been captured.

In terms of GBP, no price drop actually happened, though it might yet happen tonight due to UK fundamentals. Our target for GBP remains 1.276, while EUR could be set at 1.1815.

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

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

AUD/USD

The Australian dollar’s movement did not match yesterday’s hypothesis:the price broke through our box range, which lead to no opening opportunity.

Later on, the price came back to our box range and these ups and downs provided a good support and resistance reference. Due to widely held positive expectations for tonight’s US fundamentals ,the AUD/USDpair could well fall further.

Nevertheless, please note that reports of China’s economic recovery will serve to support the price of commodities, so the overall range is not expected to be vast.

Intraday, our recent outlook remains intact and today’s target could be set around 22-25 pips. 

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

Gold

Our overview for yesterday’s gold market was relatively accurate;the price climbed back to $1970 and then fell $18. Our profit margin space is close to $20.

Today, the price is expected to climb back to $1960 and then drop again, so a target of $8-$10 could be reasonable based on average daily fluctuations. 

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

USD Index

The USDX did not follow our predictions yesterday – or, more precisely, the price movements during the Asian and European sessionsproved more powerful than we expected.

The USDX went down to $92.75 due to positive economic reports coming from China - even the price rose afterwards and reached our target of 93.2.

For an intraday layout, the price looks set to test92.93and rise back to 93.2; $0.12 is the first target, while another $0.13 would be the next. 

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