US equity market searches for direction, initial jobless claims fall below 1m

Market Recap 9/7

Global equity market

(Source: KVB PRIME)

Technical shares behaved dramaticallyon Thursday night - the NASDAQ lead the way by dropping 5.23% to28291.73, the S&P500 fell 3.51% to 3455.06 and the Dow Jones closed down 2.78% at 28292.73.

Tesla shares dropped 10% and its share price fell below $400 with a sharp $100 turn over the last three days;Nvidia fell 8%, while Apple, PayPal and Adobe fell 6%. Facebook and Microsoft each dropped 5%, and both Alibaba and Amazon dropped 4%. 

The Europeanmarket acted much the same, with the DAX falling 1.4% to 13057.77 andFTSE decreased by 1.52% to 5850.86.

Elsewhere, the Chinese market fared no better; the Shanghai Stock index closed down by 0.58%, the while SZSE Component Index fell 0.83%and the GEM index lost 0.9%.

Precious metal forward contracts

Gold climbed back to $1950 before falling to $1930. After the US initial jobless claims announcement, the price hit back to 1921.81, still down $30 from daily highs. The price recovered a little bit afterwards,closing down 0.61% at $1930.88 per ounce.

Meanwhile, silver acted similarly: theprice fell during the North American session and eventuallyclosed down 3.14% at $26.58 per ounce.

Oil forward contracts

The WTI oil price kept around $41.5 in early trading and fell afterwards, hitting daily lows at $40.2. Later in the session, the price climbed back slightly, closing down 0.74% at $41.26.

Brent oil fell below $44, closing down at $43.99 per barrel.

Currency pairs

·        USDXup to92.74(0.086%)

·        EUR/USDdown to1.18484(-0.042%)

·        GBP/USDdown to1.32745(-0.566%)

·        AUD/USD down to 0.7271(-0.860%)

·        NZD/USDup to0.67052(0.863%)

·        USD/CADup to1.31091(0.360%)

·        USD/JPYdown to106.138(-0.021%)

Global Fundamentals

United States

Initial jobless claims for the final week of August fell to 881,000 - less than one million, beating analyst expectations and marking the lowest weekly total since the pandemic began. Challenger Job Cuts (Aug) also fell to 115,762.

Despite the optimistic jobs data, ISM’s US Non-Manufacturing PMI for Augustcame in worse than the initial estimate of 56.9 – with an eventual score of 55, the figurewas nonetheless the highest of its kind since March.

Whiting Petroleumcompleted its restructuring and resumed trading on the NYSE. It will be the first shale oil company to apply for restructuring on NYSE.

Due to the changes, the share price was worth almost nothing. The current price has now hit $19.5, a rise of 3,342%.

Europe

Bank of England (BoE)Governor Andrew Bailey dismissed implementing Bitcoin as a means of payment, whilst laying out the importance of regulating digital currencies. Bailey did, however,entertain the possibility that the central bank could issue digital coins to facilitate digital asset transactions in future.

France unleashed its100 billion euro stimulus package in an attempt to revive the economy. With the plan equating to 4% of the country’s total gross domestic product (GDP), France is injectingmore public cash into its economy than any other major European country, one official noted.

Gold

The International Gold Council announced as part of its latest report that global central banks have acquired a total of 27.2 tonnes of gold.

However, much of this acquisition has been carried out by developing nations: Turkey purchased 19.4 tonnes,Qatar bought 3.1tonnes, while India and Kazakhstan acquired 2.8 and 1.9 tonnes respectively.

At the same time, the amount of gold sold by central banks, 17.7 tonnes,marked a new high.

Today’s major assets analysis

EUR/USD

Yesterday’sEuro movement vindicated our strategy by hitting 1.180, providing us with a 30-pip profit margin. Earlier last night - followingthe European PMIs and news regarding France’s 100 billion euro stimulus plan, the market acted flat.

During the US session, the whole US equity market crashed, which slowed down the rate of the EUR’s decline.

Currently, both the EUR/USD and GBP/USD pairs are below their weekly averages, and a further drop could be on the cards due to the US’ solid fundamentals. Theprice might break 1.18 anddecline further to 1.175, while thepoundcould potentially hit 1.321.

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

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

AUD/USD

The Australian dollar performed better than we expected, crossing through the first target (0.73) and second target (0.728); thus,another 55-pip profit margin is captured.

Despite the possibility that tonight’s US fundamentals could be solid, the AUD’s price range is wilder than the USDX and its major component currencies - EUR and GBP – suggesting that the AUD is oversold in the short run. Therefore, chasing lows is not advised intraday.

If the price can draw back to 0.7285, we could place shortpositions again –though we wouldlike to reiterateour negative perdition towards the AUD’s movement in the long term.  

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

Gold

Gold seemedweak yesterday;in the short term, we still gained $15profit from the price range $1945 to 1930. The price is unlikely to drop through 1930 even though tonight’s US fundamentals might be solid.

The gold price is not going to be driven by any ‘less risk attitude’ and will possibly fight back to 1950; this price analysis is based on our understoodpattern of capital moving behind gold.

Currently, there are no signs of the market confusing‘developing countries’ central banks’with ‘all central banks’ based on the latestannouncement from the International Gold Council.

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

USD Index

As noted in our recent livecast, the USD equity market is idling without any real fuel. The market crashed yesterday, but it did not take down the USDX; the reason for this may be due to the current ‘internal circular economy structure’ observable around the world.

We will expect $0.4-0.5 profit from the USDX, but need to be wary that the price margin for longing USDX is cutting off, even if tonight’s US fundamentals turn out to be positive.

Consequently, caution is advised.

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