Markets quiet due to Labor Day closure, Brexit Withdrawal Agreement returns to spotlight

Market Recap

Global equity market

(Source: KVB PRIME)

The US stocks and shares market was closed due to the Labor Day celebrations; while the European market performed strongly: the DAX rose by 2.01% to 13100.28 and the FTSE closed up by 2.39%at 5937.4.

On the other hand, the Chinese market weakened,opening low in the morning and continuing to decline in the afternoon. The Shanghai Stock index closed down by 1.87% through 3300, the SZSE Component Index fell 2.73%and GEM index lost approximately3.34%.

Precious metal forward contracts

Gold was quiet yesterday due to the closure of the US market. The price hit a daily high of $1941.2 and then went lower afterwards, hitting a bottom of $1924 during the Asian session. It ultimatelyclosed down by 0.29% at $1929.3 per ounce.

Crude oil forward contracts

Both oils remained weak yesterday -  WTI oil opened low (falling to $38.55) and then drew back to $39; the day’s high was $39.5. During the European session, the price closed down at $39.06, marking a 0.99% fall.

Brent oil behaved much the same, closing at $42.32 via a 0.71% fall.

Currency pairs

·        USDXup to93.06(0.226%)

·        EUR/USDdown to1.18127 (-0.219%)

·        GBP/USDdown to1.31591 (-0.731%)

·        AUD/USDdown to0.7275 (-0.118%)

·        NZD/USDdown to0.66906 (-0.387%)

·        USD/CAD up to1.30944 (0.237%)

·        USD/JPY up to106.257 (0.014%)

Global Fundamentals

International

Fitch Ratings,as part of its latest Global Economic Outlook (GEO) released on Monday,announced that it expects theglobal GDP to fall by 4.4% in 2020, a modest upward revision from the 4.6% decline predicted in the June GEO.

After the unprecedented and severe coronavirus lockdown-related recession experienced in March and April,the recovery in economic activity has been swifter than anticipated, but many analysts expect the pace of expansion to level off soon.

Also，Fitchposits that unemployment shocks lie ahead for Europe, firms are cutting capex, and social distancing measures continue to directly constrain the rate of private-sector spending.

Europe

Speaking on French radio today, EU Brexit negotiator Michel Barnier said he would be seeking clarification about the UK's plans but declined to react further.

He noted that honouring Withdrawal Agreement (WA) was 'a pre-condition for confidence between two sides because everything that has been signed in the past must be respected’, whilst warning that'respecting' the WA was a 'precondition' for settling the future relationship.

Meanwhile, the UK’s Deputy Minister of Foreign Affairs opined that over-reactingto speculation regarding the agreement, adding he shared the view that 'respecting' the Withdrawal Agreement was a 'precondition' for negotiating the future relationship.

Today’s major asset analysis

EUR/USD

Yesterday’smarket was quiet due to the closure of the US region’s trading floors. Despite this, owing to analysis of the fundamentals, we could capture 30pips and around five pips with the EUR/USD and GBP/USD pairs, respectively.

Intraday, taking some profit by partially closing our positions could be wise - for mid-term placements, meanwhile, we could still hold the positions. As a result of the ongoing drama between the EU and UK(associated with the expected GDP data), we could expect more action.

Additionally, the price is under pressure from both EMAs;we can expect EUR/USD to edge towards 1.175 and GBP/USD to move towards 1.3 in the middle term.  

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

AUD/USD

The Australian dollaris largely the same,only experiencing a 10-pip movement since yesterday’s report was published. Due to less aggressive fluctuations, the price has reconsolidated even better now.

Thus, we will keep our strategy and hold our target price at 0.723.

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

Gold

Gold deviated from our strategy outline yesterday -the price dropped another $8, though our price range estimation based on big data still provided a solid guide. Nevertheless,our expectations regardingcapital’s second entrance needs to be adjusted.

The report from World Gold Councildid not provide any fresh impetus for the gold price, but major capital investorsdid. Gold’s current daily range is 1.3% and under both EMAs, so an intraday strategy that shorts Gold for another $7 seems valid today. 

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

USD Index

Despite the closure of the US market, the USDX still appreciated due to fall in both the EUR and GBP,which are major components of the USDX.

The price, as we expected, moved back to $93 and gained $0.3, a good but not great result. Even based on fundamental support, we still positive expectations for the USDX but the profit margin should be adjusted downward to just $0.20. 

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