Market Analysis

Risk-off returns as President Trump threatens new trade tariffs

Global equity markets remain under pressure on Tuesday after U.S President Donald Trump threatened to impose even greater economic sanctions on Chinese goods coming into the United States. The threat from President Trump provided the clearest indication yet that the latest round of Sino-U.S trade talks may soon end without a deal in place.

United States President Donald Trump said on Twitter that the United States would more than double trade tariffs on Chinese goods coming into the U.S and that his administration would also introduce fresh trade tariffs this coming Friday. Reports as early as last Thursday had reported that trade negotiations between Washington and Beijing had been going well.

Reports had also surfaced that Chinese officials responded by canceling any new trade talks with the U.S trade delegation, although those reports were later denied by Beijing. Chinese officials refused to comment on whether Beijing’s top trade negotiator, Vice-Premier Liu He, would join the next round of negotiations on Wednesday.
Chief U.S economic advisor Larry Kudlow suggested that the comments from President Trump were just a severe warning to Chinese officials, as the U.S President becomes increasingly frustrated by Chinese negotiators tactics during the latest round of trade talks. Sources also suggest that the latest threat from President Trump may be a negotiation tactic to put pressure on China to agree to a trade deal.
The Shanghai Composite tumbled by over five percent on the news, while VIX futures spiked over forty percent higher on Monday. The USD/JPY pair fell towards the 110.40 level as traders moved into the safety of the Japanese yen, which along with the Swiss franc is often the safe haven currency of choice for investors.


USD/JPY Daily Mountain Chart | Source: ActivTrader

USD/JPY Daily Mountain Chart | Source: ActivTrader


The USD/JPY pair is technically weak while trading below the 110.90 level, with major weekly support for the risk-sensitive pair currently located at the 110.40 and 109.80 levels. Some caution is still advised when trading the USDJ/PY pair, as a large inverted head and shoulders pattern still remains valid on the four-hour time frame.


Written by Nathan Batchelor, External Analyst, ActivTrades

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