Market Analysis

Trade talk optimism fades as China narrows the scope of discussion

Safe-haven asset classes gained ground on Monday, as reports suggested that Chinese officials will narrow the scope of discussion towards a potential Sino-U.S trade deal this week. Financial markets reacted negatively to the news, with global equity markets turning lower and investors moving into safe-haven assets such as the Japanese yen currency and gold.

News reports suggested that Chinese officials will not pursue a comprehensive trade deal with the United States in Washington D.C this Thursday as previously expected. Sources suggested that Beijing negotiators want to remove Chinese industrial policy and government subsidies from the points of discussion.

Chinese Vice Premier Liu He is set to lead the trade negotiations, while U.S Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin will lead the U.S team of negotiators. Financial markets are becoming increasingly nervous as levies on up to $250 billion worth of Chinese imports are set to commence on October 15th if a trade deal is not struck this week.

U.S President Trump had previously delayed the new tariffs as a sign of goodwill, giving both teams of negotiators extra time to strike a long-lasting trade deal. The latest news that China is going to be removing certain items is unlikely to appease U.S President Donald Trump, it also risks fracturing future trade discussions.

Last Friday, the September monthly jobs report showed that the U.S economy had created 137,000 new jobs, while the unemployment rate had hit its lowest level in over five decades, further underscoring that the American economy is fairing-well, despite the ongoing trade war with China.


 USD/JPY Daily Candlestick Chart | Source: ActivTrader

USD/JPY Daily Candlestick Chart | Source: ActivTrader


The U.S Dollar remains technically bearish while trading under the 106.90 level against the Japanese yen currency, sustained moves under this key area would leave the pair in a vulnerable position going into trade discussions. Key support is found at the 106.00 and 105.50 levels, while key resistance is found at the 107.70 and 108.80 levels.


Written by Nathan Batchelor, External Analyst, ActivTrades

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