Trade Wars Armistice Counted Against USD

RoboForex  |

By Dmitriy Gurkovskiy, Chief Analyst at RoboForex

The currency market started December against the USD. On Monday morning, the major currency pair is trading upwards as investors have no interest in the American currency as a “safe haven” asset. It happened after G20 summit, where the USA and China decided to take a break in their “trade wars”.

The parties agreed on the following: they will stop increasing import duties starting January 1st 2019 for three months in order to resume negotiations on a new trade agreement. Over this period of time, Washington shall postpone introducing additional 25% import duties on Chinese goods and “freeze“ this idea. China, in its turn, is obliged to buy a large volume of US-manufactured goods, including agricultural and commodity products.

Frankly speaking, it the same old soup just reheated, this time not in trading, but in politics. Most likely, the USA will start to put pressure on China to make the future trade agreement more profitable for Americans. There are reasons to believe that China might not like this and the Chinese government will use these three months to stimulate the country’s economy along with domestic demand and improve the banking sector in order to be ready for further “trade wars”.

However, at the moment investors aren’t interested in such distant prospects. The point is that there is a “spur-of-the-moment” thing: euphoria and rebound.

Under such conditions, investors’ interest in “safe haven” assets is reducing, thus making the USD fall.

Looking at EURUSD movements over the last month, one can see a convergent trading range, which means that the correction to the upside continues. The previous local downtrend corrected the quick rising impulse, thus “counterweighing” the market. It seems that the current ascending impulse is heading towards the resistance level and 1.1445. In other words, this correctional movement to the upside is not over yet. At the same time, the pair may start a short-term decline towards the local support at 1.1322 and break it. In this case, the instrument may continue falling towards the key support at 1.1288. However, according to the main scenario, EURUSD is expected to move upwards to reach the Triangle’s upside border.


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DISCLOSURE: I wrote this article by myself and have no positions in discussed assets.

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