US China Trade Deal FINALLY Here
After today, markets will try and figure out “What’s next?”.
Share this:
Today is the day the United States and China have been preparing for…the day the two countries sign “Phase One” of the US-China trade deal. President Trump and the China lead negotiator for the deal, Liu He, will meet in Washington today to formally sign the deal.
The markets already know what Phase One is all about… primarily, larger agriculture purchases by China from the US in exchange for “some” tariff reductions. China also was un-designated by the US as a currency manipulator. However, as my colleague Matt wrote about earlier, tariffs are expected to remain in place. What does that mean for the stock markets and the fx markets moving forward? There have been comments and speculation that “Phase Two” of the deal may not begin to after the US Presidential election in November. As such, the markets may be left in limbo until the election.
Yesterday, when discussing the CPI data we addressed the DXY. We noted how there was a confluence of resistance and it was that it was decision time for the DXY. It is not a surprise that this coincided with the signing of the trade deal, as markets are deciding what to next. If the uncertainty of the trade deal is out of the way and China is longer a “currency manipulator”, one would the value of the US Dollar to weaken as the Chinese Yuan strengthens.
Source: Tradingview, City Index
Today the DXY is moving lower, as it could not push through this resistance level. As a result, EUR/USD is pushing higher, back above the downward sloping trendline of the long-term wedge price has been in since the second half of 2018, near 1.1150. The 200 Day Moving Average also comes in near this level at 1.1139.
Source: Tradingview, City Index
The S&P 500 has been moving in an upward sloping channel since early October 2019, and continues to put in new all-time highs, currently near 3300. But one should consider today’s signing could be a “buy the rumor, sell the fact”, as price is currently near the top of the upward sloping trendline of the channel, as well as, the Golden Fib level of 161.8% retracement of the move lower from Q4 2018 near 3335. In addition, the RSI is diverging from price, an indication of a possible reversal.
Source: Tradingview, CME, City Index
After today, markets will try and figure out “What’s next?”. If data confirms that both the US and China are holding up their ends of the deal, stocks may continue to rise and the DXY may continue lower (with USD/CNH). However, if it is determined either side is not living up to expectations, stocks could head lower and the DXY could be on the rise again.
Today is the day the United States and China have been preparing for…the day the two countries sign “Phase One” of the US-China trade deal. President Trump and the China lead negotiator for the deal, Liu He, will meet in Washington today to formally sign the deal.
The markets already know what Phase One is all about… primarily, larger agriculture purchases by China from the US in exchange for “some” tariff reductions. China also was un-designated by the US as a currency manipulator. However, as my colleague Matt wrote about earlier, tariffs are expected to remain in place. What does that mean for the stock markets and the fx markets moving forward? There have been comments and speculation that “Phase Two” of the deal may not begin to after the US Presidential election in November. As such, the markets may be left in limbo until the election.
Yesterday, when discussing the CPI data we addressed the DXY. We noted how there was a confluence of resistance and it was that it was decision time for the DXY. It is not a surprise that this coincided with the signing of the trade deal, as markets are deciding what to next. If the uncertainty of the trade deal is out of the way and China is longer a “currency manipulator”, one would the value of the US Dollar to weaken as the Chinese Yuan strengthens.
Source: Tradingview, FOREX.com
Today the DXY is moving lower, as it could not push through this resistance level. As a result, EUR/USD is pushing higher, back above the downward sloping trendline of the long-term wedge price has been in since the second half of 2018, near 1.1150. The 200 Day Moving Average also comes in near this level at 1.1139.
Source: Tradingview, FOREX.com
The S&P 500 has been moving in an upward sloping channel since early October 2019, and continues to put in new all-time highs, currently near 3300. But one should consider today’s signing could be a “buy the rumor, sell the fact”, as price is currently near the top of the upward sloping trendline of the channel, as well as, the Golden Fib level of 161.8% retracement of the move lower from Q4 2018 near 3335. In addition, the RSI is diverging from price, an indication of a possible reversal.
Source: Tradingview, CME, FOREX.com
After today, markets will try and figure out “What’s next?”. If data confirms that both the US and China are holding up their ends of the deal, stocks may continue to rise and the DXY may continue lower (with USD/CNH). However, if it is determined either side is not living up to expectations, stocks could head lower and the DXY could be on the rise again.
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
USD/JPY outlook: Hawkish Fed recalibration pressures the yen
Stronger US growth momentum and rising Treasury yields are keeping USD/JPY pointed higher, even as Japanese policymakers try to limit the pressure building across domestic markets.
AUD/USD Crushed Ahead of Jobs Report as US Dollar, Yields Surge
AUD/USD slumps towards 70c as surging US yields and a stronger dollar overshadow Australian jobs data and the RBA outlook.
USD/MXN Forecast: Peso Loses Momentum Ahead of Banxico Decision
Over recent trading sessions, the Mexican peso has started to show signs of losing strength against the U.S. dollar. This can be seen in the performance of USD/MXN, which has gained more than 1.7% over the last three sessions, highlighting the dollar's renewed strength against the peso.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.