Mohicans markets ：Rising recession fears lead to market turmoil, rising Eurozone bond spreads face stagflation challenges

Fundamentals:

U.S. ISM manufacturing performs well for 26th straight month, new orders rate falls

The U.S. July ISM manufacturing PMI recorded 52.8, the 26th consecutive month of good performance. The U.S. July ISM new orders index fell to the lowest level since May 2020; the U.S. July ISM manufacturing price payment index fell from August 2020. the lowest level since a month. The agency sees signs that the rate of new orders has fallen, as experts grow increasingly concerned about excess inventories and continued record delivery times.

US Treasury raises quarterly borrowing forecast to $444 billion

The U.S. Treasury Department raised its forecast for federal government borrowing in the three months through September, as the Fed's balance sheet reduction boosted Treasury's need for private sector financing. Quarterly borrowing estimates were raised by about $262 billion to $444 billion, compared with the original estimate of $182 billion, and the September-end cash balance estimate was unchanged at $650 billion, according to a Treasury Department press release on Monday. The change reflects the fact that the Treasury Department did not assume in May that the Fed would reduce its Treasury holdings.

OPEC crude output improves but remains below its quota

OPEC+ secondary sources said that Russia's crude oil production rose to 9.78 million bpd in June from 9.27 million bpd in May, 885,000 bpd below the output quota set by the OPEC+ agreement and a 128 bpd shortfall from May's output million barrels improved. In addition, according to Reuters statistics, OPEC's July oil production increased by 310,000 barrels per day from June to 28.98 million barrels per day, 1.3 million barrels per day below the target.

On the disk performance:

On Tuesday (August 2), the U.S. dollar was trading around 105.40 in early Asian trading. The U.S. dollar weakened on Monday, as investors increased their bets that the Feds aggressive policies would plunge the U.S. economy into recession; gold prices extended gains, approaching a one- month high, coupled with the impact of geopolitical tensions, may have further room for gold prices to rise; crude oil fell more than 4%, demand concerns increased, and investors prepared for the supply meeting of OPEC and its oil-producing allies this week.

In commodities, Brent crude futures fell 3.8% to settle at $100.03 a barrel, having traded as low as $99.09 earlier in the session. U.S. crude futures fell 4.8 percent to settle at $93.89 a barrel, having traded as low as $92.42 earlier.

At the close of U.S. stocks, the S&P 500 fell 0.28% to close at 4118.59 points. The Nasdaq fell 0.18% to close at 12,368.98 points, the Dow Jones Industrial Average fell 0.14% to close at 32,798.60 points; U.S. gold futures rose 0.3% to settle at $1,787.70 an ounce.

Technical information:

Dollar:

Beijing time on Tuesday (August 2) in early Asian trading, the US dollar index fell slightly and is currently trading around 105.35. The U.S. dollar index was volatile after data showed U.S. manufacturing activity slowed less than expected in July. But the focus of investors this week will be the U.S. non-farm payrolls report for July due on Aug. 5.

The U.S. dollar index is up about 10% so far this year, boosted by investor expectations for aggressive interest rate hikes by the Federal Reserve. However, the dollar then retreated as expectations for a rate hike by the Federal Reserve cooled, closing down 0.41% at 105.39 on Monday.

Yesterday, the US dollar fell to the 105 area we expected. Obviously, this is the weekly level support, and the previous 104.7 is also a relatively dense trading area. Therefore, the US dollar has been adjusted for two consecutive weeks, and the downside is limited. After all, the decline here is more due to the help of profitable chips of market sentiment cashed in. Combined with last week's inflation data is still not optimistic, that means that the expectation of interest rate hike in September has not been completely eliminated, coupled with the global new crown epidemic and monkeypox epidemic, risk aversion factors still exist, so we must consider what I have been emphasizing above“ The interest rate hike is for a soft landing of the economy and lessening the scarring effect” view, don't be overly bearish on the dollar.

Focus on resistance: 105.8 to 106.4 area   Focus on support: 104.6 to 105.16 area

Gold:

At the beginning of the Asian market on Tuesday (August 2), spot gold fluctuated higher, hitting a new high since July 5 to around 1780.39. After the meeting, it will fall back. The daily line is expected to record five consecutive positives, mainly due to the decline in US bond yields and the decline in the US dollar. Because the market is worried about the U.S. economic recession, the Federal Reserve is expected to slow down the process of raising interest rates, the U.S. ISM manufacturing PMI hit a two-year low, and the U.S. dollar index once again refreshed a new low in more than three weeks, providing gold prices with upward momentum. However, this week the RBA is expected to raise interest rates by 50 basis points, and the market expects the Bank of England to also raise interest rates by 50 basis points.

At present, although the possibility of gold breaking the $1,800/oz mark in the next few trading days is already very high, and the target can even be seen around the daily Bollinger line around 1824, it is still necessary to beware of a surge in the short-term. The possibility of a pullback and a shock adjustment. On this trading day, pay attention to the RBA interest rate decision and JOLTs job vacancies in the United States in June, and pay attention to the speeches of Chicago Fed President Evans and Cleveland Fed President Mester.

From the chart, the short-term trend is still biased towards the bullish outlook. Gold is expected to continue to rise temporarily in the short-term. Pay attention to the resistance near the low of 1788 on May 16. If it successfully breaks through the resistance, it is expected to further rise to the vicinity of the 1800 mark. Note below the sub-disk support 1772.

But pay attention to the 1764 position of the rising relay point. The options market is dominated by short bets, followed by the support of 1758-1750. My personal suggestion is to remember not to chase more operations. If you want to do more, you need to wait for a fall back for reasonable support price.

Resistance: 1780----1788----1800           Support: 1772----1765----1750

Crude :

In early Asian market trading on Tuesday (August 2), U.S. oil was now at $94.08 per barrel; oil prices fell more than 4% on Monday, helped by weak manufacturing data in many countries, which affected the demand outlook. Libyan crude oil production and exports rebound as investors prepare for this week's supply meeting of OPEC and its oil-producing allies.

The focus of the day is on JOLTs job vacancies in the United States in June.

Overall, despite the continued escalation of geopolitical tensions to provide support for oil prices, and the Iranian nuclear talks may once again stalled due to tensions between the United States and Iran; but weak economic data, increased demand outlook worries, Libyan production rebounded, while the market is waiting for the OPEC+ meeting. Under the influence of multiple negative factors, oil prices may return to the $90 per barrel.

As analyzed yesterday, from a technical point of view, the current bullish rebound of crude oil has been completed, and the current oil price is close to the low of 91.62 on July 14. The rebound in the past two weeks has been regarded as a downward rebound correction, so after the rebound correction, what is coming is the “midline bearish trend” mentioned yesterday.

Resistance: 93.3 to 94.38   Support: 90.7 to 91.52

(The above analysis only represents the opinions of analysts and does not serve as any investment guidance recommendation, and does not assume any responsibility for any loss or damage caused by any direct or indirect transaction risks, losses or gains related to any personal investment.)