China Announces New Tariff on American Goods
- 26 August 2019
CURRENCY MARKET OBSERVATIONS – 26 August 2019
Fundamental Outlook Last Tuesday, U.S. President Trump spoke in White House conference and alleged that China has been cheating in bilateral trades for 25 years. The comments came hours before Trump administration approved the sale of arms to Taiwan worth USD2 billion.
On Friday, Federal Reserve chairman Powell addressed in Jackson Hole summit and reiterated that policymakers will act in appropriate actions according to economic changes. He has not comment on monetary policy but laments the trade war has triggered global slowdown.
President Trump lashes on weak Federal Reserve despite his consistent pressure for aggressive rate cut by policymakers. He also urges all U.S. companies to look for alternative in doing business beside China.
The People’s Bank of China announces the lowering of Prime rate from this month onwards in order to boost the economy. The aim is to stimulate growth of smaller enterprises with lower cost of borrowings and boost China’s economy.
While U.S. Governors had their autumn recess in Jackson Hole on Friday, China announced new tariff of USD75 billion on American goods. Some will commence in September while the remaining will begin in mid-December. Soon after the news release, stocks declined and Gold rose in American market session.
Japan – South Korea tension escalates due to trade dispute and after South Korea intends to cancel the intelligence-sharing pact with Tokyo. The pact is a sharing deal on the military and missile activity from North Korea.
Italian Prime Minister, Giuseppe Conte, formally tenders his resignation and triggers a possible political turmoil in near future. The debt-to-GDP ratio for the country amounts 131 percent that is highest in Eurozone after Greece.
Technical Forecast USD/JPY fell on Friday after the Dow Jones market slid. Technically, we reckon a very strong resistance at 106.70 in market. Overall sentiment is prone in falling and testing the next support at 104.70 level. After that, we expect mixed trading in market but going beneath 106.70 level will initiate a new selling trend to 101.00 in near future.
EUR/USD has shown strong support at 1.1060 and bounced on Friday. This week, we forecast the trend will climb and reach 1.1250 region before resistance emerges. In overall appearance, the market seems to be supported at 1.1060 area and should trade in some recovery in coming weeks. The unlikely event of breaking beneath 1.1060 support needs to abandon your long-view.
GBP/USD has begun to recover after the trend managed to stand above 1.2120 level. This week, the trend is prone to rise and reach 1.2450 before encountering profit-taking activity in market. We presume this is a recovery that will be short-lived before the BREXIT date and huge sellers will be waiting on the market topside as trend rises.
Gold prices jumped USD30 range on Friday as fearful investors hope to seek safe haven after China announced tariff increment on U.S. imports. As we predicted last week, market support is firm at USD1490 /oz and likely to swing up the demand for a while. This week, we foresee the first resistance will emerge at USD1540 /oz level but beware of piercing above this level will trigger a run-up in the market to USD1580 /oz.
WTI Crude prices plunged from USD56 /barrel on Friday after the Dow market fell. This week, we foresee the trend may fall and re-test USD51 /barrel should the bear emerge. Overall trend is weak and the range will be contained from USD51 – USD56 /barrel range. In our opinion, the yellow metal has to be softened in demand in order to trigger the fund moving into oil market.
Silver prices rose on Friday with Gold demand. This week, the trend will be strongly supported at USD17.00 /oz while it is close to USD17.50 /oz level. Beware of piercing the aforementioned resistance and will test USD18.00 /barrel area. Overall sentiment in Silver prices is still robust and should be traded with plan to establish long positions whenever it retraces lower.
Crude Palm Oil (FCPO) Futures on Bursa Derivatives rose on weekly basis as demand increased last week. November19 Futures contract settled at RM2263 /MT on Friday. This week, we predict the trend may retrace as trade war has resurged. Support is identified at RM2200 /MT with immediate resistance emerges at RM2280 /MT level. Breaking above the aforementioned resistance will climb further and reach RM2330 /MT region.
DAR Wong has 30 years of trading and hedging experiences in global financial markets. The opinion is solely at his own. He can be reached at email@example.com