lower than expected exchanged levies between US and China raised the risk appetite

Walid Salah Eldin

Active member
19th September 2018 - The lower than expected exchanged levies between US and China raised the risk appetite

The global equities markets could find leeway to recover Monday losses, After levies exchange between US and China.
US started this time by imposing 10% tariff on $200b worth of Chinese imports, then China chose to impose tariff on $60b worth of US imports and the levy rate range will be between 5% and 10%.
But both actions were weaker than expected and show weaker desire to escalate the tension meanwhile, as there are still opened channels to talk between these 2 major economies.
Trump asked China clearly to not impose the same to not be exposed to higher levies on larger amount of imports can worth $267b "The half of Chinese exports to US" and China did by this fewer symbolic announced tariff yesterday.
The risk appetite could easily bypass through these lower than expected levies which have given hope for a possible deal and engulfed will for deescalating.
Reuters said that China hopes US will maintain mutually beneficial trade relationship via dialogue of mutual respect and equality.

The demand for risk raised the UST yields by a considerable way supporting the Greenback which became more attractive comparing to the gold which is still struggling to hold close to $1200 psychological level per ounce.
While The odds of raising the Fed Fund rate twice more this year are still supporting USD which becomes more favorable in the time of trade tension, as the major exporting economies in EU and Asia can accept higher USD value versus their local currencies to overcome the US tariffs adverse influences on their exports.

The Asian equity indexes are following now their US counterparts which closed up ignoring the worries about the trade tension and the Japanese equities became favorable chance, after USDJPY broke above 112.15 formed resistance in the beginning of last month, While the Japanese market is waiting now for the outcome of BOJ broad members meeting.

And in the European session, The focusing can be by God's will on UK inflation data of August over the producing level and also the consuming level to know more about the pressure on BOE to raise rate after it has done in the second of last August.
While the mixed political situation inside the conservative party itself can tackle the Brexit deal passing, while May's government lower majority in the house of common can keep it always in check.
BOE chief Mark Carney said earlier this month that the markets see another sterling drop, if there is no Brexit deal and the real income squeeze would return for UK households for a few years.
Carney said that could lead to a material rise in prices in the shops due to weaker pound and potential tariffs and then the policy would be tighter instead of looser in that case.
GBPUSD retreated to be trading currently just below 1.3150, after the Conservative Party Conference in Birmingham raised to the surface the conflicts between May and its contender in the party and the most favorable person to Trump in UK Boris Johnson!

XAUUSD is still trading close to $1200 psychological level but below it in its day number 5 of consecutive being above its daily Parabolic SAR (step 0.02, maximum 0.2) which is reading today $1189.
XAUUSD retreated again for trading just below $1200, after failure to overcome its daily SMA50, while it is still undermined over longer range by continued being below its daily SMA100 and its daily SMA200.
XAUUSD found it easier to be traded aside near this level, after forming a higher low on last Aug. 24 at 1182.82 above its formed bottom on last Aug. 16 at 1160.24.
The daily chart of XAUUSD shows that its RSI-14 is in a closer place to the center of its neutral area reading 47.807.
XAUUSD daily Stochastic Oscillator (5, 3, 3) which is more sensitive to the volatility is having now its main line inside its neutral territory reading 38.738 and leading to the downside the signal line which is higher but close to it at 39.344 showing abating upside momentum, After negative crossover inside the neutral region.

Important levels: Daily SMA50 @ $1207, Daily SMA100 @ $1246 and Daily SMA200 @ $1284
The Closest Experienced S&R:
S1: $1182.82
S2: $1160.24
S3: $1146.00
R1: $1217.86
R2: $1235.12
R3: $1265.93

Have a good day

Kind Regards
Global Market Strategist of FX-Recommends
Walid Salah El Din


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