Deal or No Deal
Joe Perry November 25, 2019 3:15 PM
Is a Phase One deal already priced into the market?
There have been a few headlines out today suggesting that a China-US trade deal for Phase One is just about done. The key sticking point right now seems to be the which tariffs should be lifted before the deal is signed. One would have to think that some type of deal will get done, even if it means the US (President Trump in particular) giving up a lot for it to get done. But haven’t we seen this before? Phase One was supposed to be a “done deal” when it was announced, yet here we are a month later still trying to figure it out.
Stocks appear to be eating up the headlines, with the S&P 500 futures gapping higher overnight. The equity futures index is currently trading only a few handles from all-time highs.
Source: Tradingview, CME, FOREX.com
But what happens when (and if) a deal does get signed? Is a Phase One deal already priced into the market? If so, will stocks sell off on a “buy the rumor, sell the fact”? Only time will tell, but its something traders must consider. Bears may be looking to pounce on stocks if a deal is signed.
So far, USD/JPY been more skeptical of a trade deal being a “done deal”. USD/JPY has been in an inverted head and shoulders pattern since late May. Price has tested the 61.8% Fibonacci retracement level from the highs on April 24th to the lows on August 26th near 109.50 but has yet to close above it. A break above this level could send price towards the gap near 111.00. If the Golden Fib (61.8%) holds, the pair could easily be back at 108.00 in hurry.
Source: Tradingview, FOREX.com
As this is Thanksgiving week in the United States, trading is likely to be slow, especially from Wednesday afternoon onward. Any US-China headlines could move the markets quickly, as there will be less participants in the market as the week progresses. Be aware of headlines and know in advance what could happen if an announcement is released that US-China Phase One trade deal is signed.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.