Date: 11 Feb 2019

Trade talks will resume between the United States and Chinese negotiators in Beijing this week after officials from both sides failed to agree on a wide range of issues in Washington last week. Markets are starting to becoming jittery, as the deadline for the recently agreed trade tariff truce comes into effect on March 1st.

Low-level officials are expected to start the week discussing intellectual property theft, with the Trump administration expected to demand major reforms from Chinese companies in order to protect U.S companies from intellectual property theft. This is likely to be another major point of contention between both sides and a topic which U.S President Donald Trump has been vocal about since he came into Presidency more than two-years ago.

President Trump has repeatedly asked China and its President Xi Jinping to make reforms towards unfair business practices which he believes are going unchecked and giving Chinese companies an unfair advantage. Forced technology transfer, or in broader terms, forcing U.S. companies to share their technology with Chinese firms if they want a share of the Chinese market is said to be the issue.

According to officials on Friday, negotiations do not progress sufficiently last week, with President Trump and Chinese leader Xi Jinping dampening market sentiment when they announced they would be meeting this month. If the next round of talks this week fail to make sufficient progress, it is likely that the March 30th trade truce deadline would not be extended according to U.S President Donald Trump.

Markets are bracing themselves for the overall effect to the health of global economy if trade negotiations between the U.S and Chinese officials fail, as the Trump administration is scheduled to increase trade tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports.

 

USD/JPY Daily Candlestick Chart | Source: ActivTrader Platform

USD/JPY Daily Candlestick Chart | Source: ActivTrader Platform

 

The Japanese yen currency has recently relinquished its early year gains as optimism is growing that a deal will likely to be struck between the two nations, which would hopefully avoid a further slowing of the global economy. If riskier asset classes start to sell-off due to fears of a protracted Sino-U.S trade war, it is likely the Japanese yen currency will start to come back into favour.

The 110.00 resistance level is the key upside barrier, with the 110.40 and 110.90 levels the major technical barriers before the important 111.40 level. To the downside, a sustained break below the 109.60 level should trigger additional selling towards at least the 108.80 support region.

 

Written by Nathan Batchelor, External Analyst

 

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