US President Trump hospitalised with coronavirus, US equity market tumbles

(Source: KVB PRIME)

Despite the optimistic US employment figures,the Non-Farm Payrolls (NFP) data did not meet the expectations, and the US equity market fell on Friday due to concerns over President Donald Trump’s health.

The Dow Jones dropped 0.48% to 27682.81, while the NASDAQ lost 2.83% to fall to 11255.69. Meanwhile, the S&P 500 dropped 0.96% to 3348.44, with airlines and the financial services sectors leading the fall.

The European market was quiet overall –the DAX declined 0.33% to 12689.04 and the FTSE increased 0.39% to 5902.12 – while the Chinese market was closed due to a national holiday.

Crude oil forward contracts

The Oil market dropped in Friday; WTI fell from $38.72 and hit a bottom of $37 in during the North American session. The price ultimately closed down by 4.3% at $37.05 per barrel.

Brent oil, meanwhile, fell 4.05% below $40 to $39.27 per barrel.

Precious metal forward contracts

Even despite the weak USD, gold kept falling on Friday –during the European trading hours, the price hit a bottom at $1890 and then rose to test the resistance at $1915.The price then fluctuated around $1900 and closed at $1899.21 per ounce.

Currency pairs

·        USDX down to 93.69(-0.117%)

·        EUR/USD down to 1.17153(-0.247%)

·        GBP/USD up to 1.29357(0.408%)

·        AUD/USD down to 0.71622(-0.284%)

·        NZD/USD up to 0.66356(0.200%)

·        USD/CAD up to 1.32809  (0.139%)

·        USD/JPY down to 105.344(-0.188%)

Global fundamentals

United States

The US’ weekly currency supply shrank –the M1 supply was$2.1 bn,while M2 sat at$19.6 bn. 

US unemployment for September was announced as 7.9% - better than the expected 8.2% and last month’s figure of 8.4%. However,September’s NFP data missed the predicted figure of 850,000, coming in at around 661,000.

President Trump tested positive for the COVID-19 virus late last week;the US equity market dropped when the news broke.

The White House announced there were no plans for a temporary transfer of power to Vice President Mike Pence whilst the President is in hospital.

Democratic presidential nominee Joe Biden argued that the President’s diagnosis served as a good example of what could happen if the American people do not treat coronavirus seriously.

The US labour market is recovering more slowly than initially hoped, and it could take two to three years for the unemployment rate to return to levels seen in February as companies adjust to smaller staff levels and many workers retrain for new careers, Cleveland Federal Reserve Bank President Loretta Mester said on Friday.

Mester also noted she believes the Fed’s monetary policy is ‘well calibrated’ now, and determining whether inflation is at risk of getting too high will depend on what else is happening in the economy. Mester said she will continue to monitor whether inflation is ‘accelerating’ or hovering around a certain level.

UK

UK Prime Minister Boris Johnson responded to increasing demand for a second vote on the issue of Scottish independence and added that Brexit provides a great opportunity for the UK, especially its fishing industry.

The Prime Minister claims a Brexit agreement is close to complete but added the UK is ready to accept any outcome,even a ‘no deal’ exit. He further noted that now is not a good time for independence vote in Scotland, and that the EU must understand the importance of the fishing industry for the UK. Britainis hoping to secure a trade deal with the EU comparable to Canada’s.

Todays major asset analysis

EUR/USD and GBP/USD

Last week, the pound rose whilst the euro fell. The EUR tested the 1.169 resistance before consolidating down during the North American session even though the US fundamentals were pessimistic.The price now sits slightly above the weekly EMA.

The euro is now weak while the USD has the possibility to turn stronger as the EU/UK negotiations approach their deadline. Our mid-to-long term predictions remain intact and the intraday resistance is still at 1.169.

The pound jumped 60 pips after PM Johnson’s speech, which was a strong result but not enough to break the resistance around 1.296. Therefore, the price could yet consolidate back to around the weekly average.

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

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

AUD/USD

There are some strong arguments among traders that suggest the RBA will cut interest rates further this year, which could render any predictions of resurgent AUD invalid.

Last Friday, the intraday trend followed our predictions, testing the 0.714 support. Today, the price might consolidate up to test the next resistance around 0.7194 then fall back to the weekly average. 

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

Gold

Gold tested our first resistance at 1890 but did not go any further. Even as the USD turned weak last week, the gold price was still declining.

The current price around $1890 looks set to be the daily concentrated range.

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

USD Index

The USD index does not appear strong enough to test the key $94.15 resistance today, but it seems inevitable that it will happen sooner or later.

Last week, US fundamentals were weak overall, however the worst of the decline looks to be over -on the other hand, the UK and Europe an fundamentals are uncertain as the possibility of a ‘no deal’/WTO terms arrangement between Britain and the EU looms.

Consequently, the USDX appears optimistic; if the price breaks through the weekly average, it will likely test the $94.15 resistance next.

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