BoC maintains interest rates, investors await US unemployment figures

Market Recap

Global equity market

(Source: KVB PRIME)

The main theme of yesterday’s US equity market was that of a rebound, withnew energy, technology, N-energy and oil leading the trend.

The S&P 500 rose 2.01%to 3398.96, the NASDAQ closed up 2.96% to 11395.8 and the Dow Jones climbed back 1.6% to 27940.47.

Europe had a similar story: the DAX rose 2.07%to 13237.21 and the FTSE climbed back 1.39% to 6012.84.

However, the Chinese market wasn’t so lucky, opening low and moving even lower. The Shanghai Stock index closed down by 1.86%, the SZSE Component Index fell 3.25% and the GEM index performed even worse, losing 5.4%.

Precious metal forward contracts

Gold was quiet during the Asian session, reconsolidating between $1920 to $1923. The price then started to fall during the European session, moving down to $1919.

Gold finally climbed back to $1950.71, closing up by 0.8% to $1946.3.

Sliver appreciated by 1.35% to close at $26.97.

Oil forward contracts

WTI oil began climbing during the European trading hours and hit daily highsof $38.42 during theNorth American session. It ultimatelyclosed up by 2.84% at $37.77.

The Brent oil price alsowent up2.32% to close at $40.64.

Currency pairs

·        USDXdown to93.22 (-0.321%)

·        EUR/USDup to1.1802 (0.265%)

·        GBP/USDup to1.29934 (0.157%)

·        AUD/USDup to0.72796 (1.096%)

·        NZD/USDup to0.6678 (1.013%)

·        USD/CADdown to 1.31459 (-0.714%)

·        USD/JPYup to106.169 (0.217%)

Global Fundamentals

Europe

The UK is currently preparing legislation that, in the words of Northern Ireland Secretary Brandon Lewis, has the potential to‘break international law in a very specific and limited way’by overwriting elements of the Brexit agreement that British PM Boris Johnson previously signed last year.

EU representatives stated that that it would not put a pause on the progress of the ongoing Brexit negotiations. Johnson opined that the Internal Markets Bill would‘ensure the integrity of the UK internal market’ and hand further devolved power to Scotland and Wales.

Canada

The Bank of Canada (BoC) elected to keep its key interest rate at 0.25%. The bank also warned of an uneven recovery despite a better-than-expected rebound, and QE support will remain in place to support the nation’s economic recovery.

Crude Oil

Morgan Stanley stated it expects oil prices to rise higher than pre-pandemic levels during 2021. The supply gap is predicted to reach 1.1million barrels per day in 2021 and WTI oil prices in Q3 of next year will be adjusted from $42.5 to $ 47.5 per barrel.

The organisation also adjusted its expectedBrent oil price by $5 to around $50 per barrel.

Credit ratings agency Moody’s Investor Service reported that it is assuming a WTI crude oil price ranging from $40 to $45 per barrel for 2020. However, it added that it expects per-barrel prices to return to $50 to $55 territory in 2021.

The agency currentlytakes the view that that it is unlikely the industry will recover to a positive cash flow over the next 12 months,whilst also positing that capital expenditure will decrease in 2021.

The US Energy Information Administration’s (EIA) Weekly Petroleum Data for the week ending 28^thAugust shows global demand forcrude oil was adjusted downwards by 0.21 million barrels to -8.32 million barrels per day.

It also predicts that WTI and Brent oil prices will be cut to $38.99 per barrel and $41.90 per barrel respectively in 2020.

Today’s major asset analysis

EUR/USD and GBP/USD

The Euro’s price drew back as we expected, but was stronger than we predicted, crossing over 1.178 to stand at 1.18. The price is still under the weeklyEMA, which provided a resistance reference. We would suggest keeping our mid and long-termplan in place for the Euro pair today.

The pound, on the other hand, is weaker than the Euro, but we ideally need to wait and observe the market for more reference and supporting arguments due to the current lack of movement.

The GBP/USD pair might return to1.3, but participation is not advised at the moment due to concerns over a potential further dropin price.

There seem to be about 40 pips available to capture for the EUR/USD in short term as a result of tonight’s interest rate decision, but the traders should be aware the price could quickly drop again after the US fundamentals are released.  

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

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

AUD/USD

Due to the optimisticannouncements and statements regarding the Euro’s recovery and expectations that the USDwouldbesoldoff, the dollar turned weak and the price of the AUD/USD pair drew back.

Nevertheless, it is still not necessary for us to change our short AUD positions in the mid to long term. Instead, we would maintain our previous strategy for now – a short-term target could be around 0.724.

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

Gold

Another $7 profit margin was revealed from yesterday placement and the price followed our predictions, drawing back to $1915 and moving up to around $1945.

Goldbroke both EMAs after numerous buyers entered the market around $1915. However, we expect there will be no change to the ECB’s interest rate today, which along with positive initial jobless claims figureswill likely push down the price of gold.

Therefore, buying gold at its current price is not advised.

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

USD Index

A $0.20-0.24 profit margin provides us another accurate prediction for yesterday’s market. Please note that tonight’s Europeanfundamentals will place pressure on the USDX, while unemployment datais slated to provide support for the USDX.

Based on the current price fluctuation range, the index was $0.1 down during the European session, whilesome estimates state it will appreciate $0.15during US tradinghours.

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