US-China Trade War Pause Boosts USD, Drives EUR/USD Down
The recent agreement between the US and China to pause trade tariffs for 90 days has caused a significant impact on the foreign exchange market, with the USD rallying against major peers and the EUR/USD pair falling below 1.11 to a monthly low. Here’s a breakdown of the key points and implications of this development:
Key Points:
- USD Strengthens: The de-escalation of the trade war has boosted the USD, turning investors bearish on the EUR. The USD is rising against its major peers following the announcement of the tariff reduction agreement.
- Inflation Data: In the upcoming week, US inflation data is expected to show steady figures for April. Federal Reserve Chair Jerome Powell’s speech will also be closely watched for any changes in stance due to the recent trade developments.
- Eurozone Data: The euro will be affected by eurozone inflation and economic data, with expectations of interest rate cuts to support growth and cool inflation.
EUR/USD Forecast – Technical Analysis:
- The EUR/USD pair is falling, breaking below 1.12 and dropping out of its rising channel to a low of 1.1080.
- Sellers will aim to break below the 50 SMA to extend losses towards the 1.10 psychological level.
- Buyers need to rise above 1.12 to target the lower band of the rising channel at 1.1280.
FTSE Rises on Trade Optimism:
The FTSE and its European counterparts are trading higher on Monday, driven by optimism surrounding the US-China trade war de-escalation. Here are the key points to consider:
Key Points:
- Miners Lead Gains: Heavyweight mining companies such as Glencore, Antofagasta, and Anglo American are trading up over 7%, benefiting from the improved outlook on metal prices tied to the Chinese economy.
- Pharmaceuticals Decline: Pharmaceutical companies like AstraZeneca are facing losses after President Trump’s plans to lower drug prices, causing a shift in market dynamics.
FTSE Forecast – Technical Analysis:
- The FTSE has rebounded from its recent low and is consolidating around 8600 after facing resistance at 8700.
- Buyers will look to surpass 8700 to create new highs, while support levels can be found at 8520 and 8480.
In conclusion, the recent developments in the US-China trade war have had a significant impact on the financial markets, particularly in the foreign exchange and stock markets. Investors should closely monitor key economic indicators and technical analysis to navigate the changing landscape and make informed investment decisions.
Sources:
- Original Post