Market Overview

FxPro: Markets have lost faith in the U.S.-China trade truce

Chinese markets and futures for S&P500 has started trading on Thursday with a falling by about 2% after reports that Canada arrested CFO of Huawei, Chinese IT giant, with intention of extraditing her in the United States. This news sparked fears of a new spiral of tightening rhetoric between the world’s largest economies, returning the demand for protective assets.

From the peak levels at the start of the week, index S&P500 lost over 5%, and has returned back three-quarters of its rebound in the second half of November.

Skepticism about the rapid resolution of trade conflicts supports US Dollar, which is once again seen as a safe-haven currency. The thrust aside from the risks helps it to remain it near the bottom edge of the upward channel.

Meanwhile, the single currency cannot choose its trend, being almost unchanged in November. Over the past month, the fluctuations of the pair have become less pronounced, as market participants consolidate their positions in anticipation of important signals from the Fed and the ECB, the most influential world central banks. The EURUSD pair fluctuates around the level of 1.13, which was a significant level of resistance in 2015-2016 years, making it a significant level for markets.

When in 2016th the pair failed to develop its growth above 1.13, it quickly collapsed almost by 10% in the area of 1.0350. Slightly less drastic declines were also in February and October 2015th, when EURUSD has sharply bounced down to 1.05, after a breakthrough of support in the mentioned area. Among the technical factors should also be noted the formation “Head and Shoulders”, which is a signal of decline from the current levels. Simply put, EURUSD remains in a medium-term trend downward with possible targets on 1.03-1.05, or risks for months to remain in the range with support near 1.13.

However, the next few weeks promise to be very eventful with the potential impact on the pair. At the end of this week, data on the U.S. labor market will be released, which may confirm or dispose the hypothesis that the economy is losing momentum which could potentially lead to the pause of the Fed rate hike. The meetings of the ECB (Dec 13) and the Fed (Dec 19) will be equally important, as they can provide markets with hints of the central banks future policies in 2019.

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