Trump striked, USD boosted

President Trump calls time on stimulus talks, dollar rises as US stocks decline

(Source: KVB PRIME)

US President Trump is back in the White House and the US equity market dropped yesterday as stimulus plan negotiations continued.

The Dow Jones decreased 1.34% to 27772.76, while the S&P 500 dropped 1.4% to 3360.95 and the NASDAQ fell 1.89% to 11291.27.

Meanwhile, the European market reconsolidated upwards; the DAX increased 0.61% to 12906.02, while the FTSE rose 0.12% to close at 5949.94.

Crude oil forward contracts

Both oil prices went higher but then slowed down; WTI closed up by 1.16% at $39.81 per barrel with a maximum intraday increase of 4% during the US session.

Brent oil increased 0.89% to $41.98 per barrel with a maximum intraday increase of around 3%.

Precious metal forward contracts

Yesterday, gold dropped to daily lows of 1874.48 and closed at $1877.88, marking a 1.82% drop.

Sliver behaved similarly with a maximum daily drop of 6% to below $23. It closed down at $23.06 per ounce, representing a 5.36% decline.

Currency pairs

·        USDXup to 93.82 (0.460%)

·        EUR/USD down to1.17301(-0.454%)

·        GBP/USD down to1.28753(-0.792%)

·        AUD/USD down to0.70998(-1.127%)

·        NZD/USD down to0.65775(-0.955%)

·        USD/CAD up to 1.33119(0.416%)

·        USD/JPYdown to105.611(-0.101%)

Global Fundamentals

United States

US President Donald Trump ended talks with Democratic leaders on a new stimulus package, hours after Federal Reserve Chair Jerome Powell’s strongest call yet for greater spending in order to avoid damaging the current economic recovery.

Cleveland Federal Reserve President Loretta Mester warnedon Tuesday that President Trump’s announcement that no further stimulus talks are to take place until after the November election could put a dent in efforts to bring the economy back from its coronavirus lockdown-induced slide.

Mester opined that ‘we’re doing our part,’while adding‘the fiscal authorities, who were very good at the beginning coming in with a lot of aid, I think they need to do more now.’

UK

European Central Bank(ECB) Chief Christine Lagarde revealed that she has prepared for the worst-case scenario regarding the Brexit negotiations, but added that she remains hopeful.

Lagarde also re-asserted that the currency price is not the key objective of fiscal policy for the central bank,despite being one important aspect to consider.

Australia

The Reserve Bank of Australia (RBA)has kept interest rates on hold at 0.25% ahead of the Federal Budget stimulus.

In an official statement accompanying the decision, RBA Governor Philip Lowe remarked that ‘a recovery is now underway in most of Australia, although the second-wave outbreak in Victoria has resulted in a further contraction in output there’.

Crude oil

Hurricane Delta is intensifying and is now a major Category 4 storm; Yucatan Island has issued a code red warning and is now in a state of emergency.

US Gulf of Mexico offshore oil and gas producers continued shutting in wells and evacuating crew members on 6^th October as the hurricane is projected to make landfall in Louisiana this weekend. 

The Bureau of Safety and Environmental Enforcement(BSEE)projected it could cause production losses of up to 0.54m barrels.

The Energy Information Administration(EIA) predicts Brent crude oil will be priced at $41.19 per barrel in 2020,coming in below previous predictions of $41.9. WTI crude oil is at $38.76 per barrel,slightly lower than the previous expectation of $38.99.

Daily production in 2020 is forecast tobe 11.45 million barrels per day higher than the previous prediction of 11.38 million barrels per day. The organisations maintains its global demand prediction at -8.32 million barrels per day.

Today’s major asset analysis

EUR/USD and GBP/USD

The euro and pound both followed our expectations yesterday following President Trump’s claims that there won’t be any further negotiation for stimulus plans until the end of the election on 3^rd November.

As such, USD’s liquidity may change in the near future as USD asset prices are pushed up.

The EUR tested resistance and support levels at 1.180 and 1.1745, respectively – the next support is at 1.169 and this could be tested tonight.

Meanwhile, the GBP tested 1.288 as expected and the next resistance is at 1.29. Intraday, the pound may reconsolidate back to this vicinity before dropping further to test the support around 1.283. 

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

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

AUD/USD

The Australian dollar moved below its weekly average yesterday and dropped to the mid-term support around 0.71.

Today,the AUD could potentially reconsolidate back to 0.7135 and test the support boundary at 0.706. 

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

Gold

Gold continues to drop below the key$1890 support line, sitting at a level equivalent to 23.6% of previous highs seen on 25th September.

The trajectory looks set to continue edging downwards in the long run; gold’s key support is now at $1865 and the resistance is around$1890. 

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

USD Index

The USD Index tested the 93.7 resistance yesterday and may now rise to 94 in the short term.

As a result of the coverage surrounding the US election, USD assets will likely be pushed up. The current support is at 93.65, while the resistance is at 94. 

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