US President Trump decided last week to escalate the trade he started with China by announcing a 10% tariff on $300 billion worth of Chinese imports starting September 1st 2019. This would essentially tariff all Chinese imports to the US and sources claim that he acted against the recommendation of his top advisors. After Trump announced his decision, market entered a risk-off mood as traders awaited the Chinese response. It was delivered yesterday and send US equity markets into their worst sell-off of 2019 with the Dow Jones at one point almost off by 1,000 points.
China allowed its Yuan to breach the coveted 7 mark to the upside against the US Dollar in a sign that the world’s second largest economy sees no end to the trade war. Trump, in his usual manner, took to Twitter and tweeted “China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!” While the Yuan took the headlines in the forex market, this was only one part of the Chinese response to Trump’s new tariff.
The Chinese government directed companies to stop purchasing US agricultural goods and also noted that it may apply tariffs on all imports dating back to August 3rd 2019, the day Trump announced the new tariff on Chinese imports. Chris Krueger from Cowen Inc. summed up this move by adding “While there were measures that could have been chosen with larger direct effects on supply chains, the announcements from Beijing represent a direct shot at the White House and seem designed for maximum political impact. We expect a quick (and possibly intemperate) response from the White House, and consequently expect a more rapid escalation of trade tensions.” This has additionally increased expectations that the US Fed will cut interest rates again in September.
Is now the time to sell the US Dollar as the US Fed may feel forced to cut interest rates further while the US economy will accelerate its slowdown? The global economy is heading towards a global recession as US President Trump is waging his trade war which will now have a bigger direct negative impact on US consumers. Follow the PaxForex Daily Fundamental Analysis now, where you earn more pips per trade!
After the Chinese government allowed the Yuan to move past the 7 mark, investors are now wondering if China will dump some of its US Treasuries in order to retaliate against Trump’s tariffs. Stephen Roach of Yale noted “Most people didn’t think they’d use the currency weapon and they’ve used that, and used it surgically. So conceivably, they might consider other options, and you can’t rule out the Treasuries option. “ China has started to shrink its holdings which are likely to fall further. Sebastien Galy, Senior Macro Strategist at Nordea Investment Funds, noted “Once China doesn’t show up in the direct auction bids, the U.S. Treasury will know it. And their bids via indirect bids, through the banks, if China doesn’t show up, the banks will know it immediately.” The US-China trade war escalates further, but here are three trades to boost your profitability!
Forex Profit Set-Up #1; Buy AUDUSD - D1 Time-Frame
The Australian Dollar remains the top Yuan proxy currency and with US President Trump attempting to force his own central bank to slash interest rates further, the AUDUSD is poised to enter a short-covering rally. Price action is currently depleting bearish momentum inside of its horizontal support area from where a breakout is expected. This would clear the path to the upside until the AUDUSD can challenge its next horizontal resistance level and extend its rally into its primary descending resistance level. Forex traders are recommended to spread their buy orders inside of its horizontal resistance area.
The CCI is trading in extreme oversold conditions, but started to recover and is now on its way to complete a breakout above the -100 mark which is anticipated to attract the next wave of buy orders. Open your PaxForex Trading Account now and join our fast growing community of profitable forex traders!
Forex Profit Set-Up #2; Sell USDZAR - D1 Time-Frame
With the US Dollar facing a combination of headwinds, forex traders are anticipated to reduce their exposure. The USDZAR started to lose bullish momentum after price action was rejected by its horizontal resistance area, enforced by its primary descending resistance level. This currency pair is now favored to accelerate to the downside until it can test the strength of its next horizontal support level. Selling any rallies in the USDZAR into the upper band of its horizontal resistance area remains the favored trading approach.
The CCI is trading in extreme overbought territory, but off of its most recent intra-day high. This momentum indicator is now expected to plunge below 100 which is likely to accelerate the sell-off. Download your PaxForex MT4 Trading Platform and find out why more forex traders every day prefer to grow their balance at PaxForex!
Forex Profit Set-Up #3; Buy LTCUSD - D1 Time-Frame
Cryptocurrencies offer a great way to diversify into an asset class which is not as inter-connected to the rest of the global financial system as other options. LTCUSD has bounced off of the upper band of its horizontal support area which resulted in a sharp increase in bullish momentum. Price action has been guided higher by its secondary ascending support level and is now anticipated to complete a breakout above its secondary descending resistance level. This would allow LTCUSD to extend its rally until it will reach its primary descending resistance level.
The CCI briefly spiked into extreme overbought conditions, but has since reversed while remaining in bullish territory. This momentum indicator is now expected to once again accelerate to the upside. Subscribe to the PaxForex Daily Forex Technical Analysis where you can reap the easy profits as a result of the hard work of our expert analysts!
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