Markets see to have spent the last three days waiting for the US-China Trade talks scheduled for two days Thursday-Friday. Trump tweeted that he would impose new tariffs on Friday.
On Monday Trump tweeted “For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday.”.
CNBC: China’s chief trade negotiator, Vice Premier Liu He, is due in Washington later this week for a critical round of discussions with Robert Lighthizer, Trump’s top trade envoy and Treasury Secretary Steven Mnuchin.
Nomura published five alternative scenarios for US-China trade negotiations.
Danske Bank forecast two outcomes on Thursday-Friday meeting.
The talks on Thursday will be crucial. If the two sides can meet each other sufficiently for Trump to cancel, or at least postpone, the tariff increase, then it is probably a sign that a deal is still believed to be within reach by the two sides. However, if Trump decides to move on with the tariff increase, then there is a very high risk we get a breakdown of the talks and the Chinese delegation pack their bags and go home on Friday without continuing the talks. It will be hard for a Chinese Vice Premier to continue negotiations in what could be seen as a humiliation domestically in China. It could leave a period without new scheduled talks and, worst case, that Trump quickly starts the process of imposing 25% tariffs on USD325bn as he has threatened to do.
Ahead of the two-day shorter meeting, we remain cautious on USDJPY and AUDJPY among JPY crosses, AUDUSD in G10 block and Gold and Copper on the commodity side.
Markets overnight closed with gains with S&P 0.30%. In Asia today NZD little up by 0.15% among G10 block. Turning to commodities Gold traced out a double top pattern between 1289-1291.50$. Overnight the yellow metal rejected at 50MA and lost 4$. Support finds at 1277$, 1272$ and 1266$.
The cross USDCNH has been facing resistance at 200MA coincides with the 50.0 fib reaction.
Looking at the day ahead, it’s a reasonable busy Asia session with April China CPI and PPI in the US.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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