US enjoys positive PMI and home sales data, EU and US reach tariff reduction agreement

Market Recap

Global equity market

(Source: KVB PRIME)

US stocks opened weak on Friday and strengthened during the afternoon session;the Dow Jones rose nearly 200pips at the end, closing up by 0.69% at 27930.33. As of closing, the NASDAQ and S&P 500 both reached new highrecords, closing up by 0.68% at 11555.16 and 0.34% at 3397.16, respectively.

Technology stocks generally rose, Chinese concept stocks reboundedand microchip stocks continued to be active. Tesla and Apple both set record highs.

The major European stock indexes fell slightly across the board- the German DAX index fell 0.51% to 12764 and the British FTSE 100 index fell 0.19% to 6001.89.

The three major A-share stock indexes fluctuated at a high level in the morning and rebounded after a sharp fall in the afternoon. At closing, the Shanghai Composite Index rose 0.5% the Shenzhen Component Index rose 1.18%, and the ChiNext Index rose 1.72%. The ChiNext Index has fallen for three consecutive weeks.

The turnover of the two cities was about 840 billion yuan, which was less than one trillion for two consecutive days, and the net inflow of northward capital was about 1.1 billion yuan.

Precious metal forward contracts

Gold was still weak on Friday;at one point it fell to $1911.33 and dropped more than $40 from the day’s highest level. After that, the price of gold quickly increased by nearly $30 an hour later, consolidating above the 1930 mark in late trading and finally closing down by 0.37% to $1,939.65 per ounce.

Silver remained at the $26 mark, closing down by 1.91% at $26.73 per ounce.

Crude oil forward contracts

Last Friday, WTI crude oil continued to fall from midday - the US market broke through the $42 mark, hitting a minimum of $41.44 and falling more than 3%, before rebounding in late trading and eventually closing down by 1.09% at $42.27 per barrel.

Burundi Oil closed down by 1.29% at $44.26 per barrel.

Currency forward contracts

·        USDXclosed down by 0.07% at 93.18

·        EUR/USDclosed down by 0.559% at 1.17932

·        GBP/USDclosed down by 0.941% at 1.30885

·        AUD/USDclosed down by 0.456% at 0.71591

·        NZD/USDclosed up by 0.119% at 0.65417

·        USD/CADclosed up by0.080% at 1.31893

·        USD/JPYclosed up by 0.003% at 105.779

Global Fundamentals

Epidemic research

According to Russian officials cited by RIA Novosti, Russia is expected to produce 1.5-2 million doses of its coronavirus vaccine per month before the end of the year, while planning to increase the production of new coronavirus vaccines to six million doses per month.

On the other hand, the US Food and Drug Administration (FDA) granted emergency use authorisation (EUA) of convalescent plasma therapy for new coronary pneumonia, which will beapplicable to hospitalised patients who have tested positive for the viral disease.

United States

Markit's comprehensive August PMI for the US hit its highest level since February 2019. Data shows that as consumer demand of manufacturers and service providers increased, the business environment in the private sector has also further improved.

Existing home sales in the US set a record of growth rate for the second consecutive month during July, while house prices hit record levelsin some areas. Although the epidemic has caused millions of people to lose their jobs, interest rates have pushed up housing demand.

Over the weekend - due to increased demand for mailed ballots - the US House of Representatives approved a bill to allocate $25bn to the US Postal Service and banned any attempted postal service reforms nationwide.

The EU andUS issued a joint statement on a trade agreement that would see the EU exempt US lobster from tariffs for a period of five years, with a retrospective effect, with a view tomaking theinitiativepermanent.

In return, the US agreed to cut tariffs on a few European commodities such as crystal glassware, lighters and prepared foods by 50%. The statement stated that this arrangementmarks the first time the two countries have negotiated tariff reductions in more than 20 years.

Europe

On Friday, Brexit negotiator Michel Barnier stated that talks are progressing slowly and there is limited time left to complete the Brexit negotiations. At this stage, it seems unlikely that an agreement with the UK will be reached.

As a result, the pound broke the 1.31 mark against the USD and fell nearly 0.9% intraday. According to Barnier, the next round of talks will be held in London during the week of 7^thSeptember.

The National Bureau of Statistics of the United Kingdom said on Friday that this means that the proportion of British debt to economic output has now exceeded 100%, which is the heaviest debt burden since the early 1960s.

Crude oil

The National Petroleum Corporation of Libya said that when the army leaves, it will resume crude oil exports. Until a political agreement is reached, crude oil revenues will be kept in bank accountsand proposals to resume oil exports and production are welcome.

According to news reports, Libya plans to export 1.2 million barrels of crude oil in August and the scale of crude oil exports in September will be 1.8 million barrels.

The total number of oil rigs active in the US in the week ending 21^stAugust was 183, which was much higher than the previous value of 172 and the expectation of 170. This was the first increase in four weeks and the largest increase since 17th January.

Today's currency forecast

EUR/USD

Last weekend, the Euro had broken 1.18 as we expected, offering nearly 100 pips of profit. At present, it is expected that the price will slowly rise. There is room for the price to return to the weekly average of around 25-30 pips, but it is not recommended to participate right now.

If the price slowly returns to the weekly average, then you can still continue to lay out the short positions around 1.1835 in the short term. The first target should be 1.175 and a further target could be near 1.172.

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

GBP/USD

The pounddid not continue to rise as indicated by our technical analysis last week;on the contrary, the price directly fell by more than 100 pips. However, it has been predictedthat the GBP will fall after the excess liquidity of the USD is consumedfollowing our forecast time period.

At present, the GBP is showing a strong M-top pattern, and the possibility of a subsequent decline is high. Adding to our strategy of placing short positions in the medium and longterm (from last week), the next target can be placed near 1.303.

Please note that this decline may open upa maximum of roughly 500 pips in the mid and longterm market.

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

USD/JPY

The overall trend from last week is still showing the triangle arrangement that we previously predicted.

Given that Europe and the US have reached a trade tax reduction agreement - and the current trade policy between the UK and Japan is without concrete terms - we need to adjust our strategy.

Lay out a strategy of ​​short trades (same as above); if it breaks the position, the price could then move nearer to 106.3.

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

Gold

As far as last week’s price is concerned, gold is hovering around our prediction with a value oscillation of $10, and there are two opportunities to seize this profit via short positions in the European and American markets. We still predict that the price of gold will fall past 1900 after that.

The US general election will become a salient topic in the near future. However, it is not easy for the gold capital segment to move. In fact, the overall economy will likely perform strongly before the US general election.

Therefore, we continue to be bearish on gold - thoughin the short term, $10 per wave is ideal.

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