Global macro overview for 11/07/2018
The risk appetite mode was abating in the financial markets with the announcement of a new salvo in the US trade war with China. The pressure on commodity currencies and emerging markets are coming back, the USD recovers, but also JPY and CHF.
Peace of mind in the subject of trade wars did not last long, because at night the US administration announced that it was ready with a list of US $ 200 billion worth of imported goods from China, which will be analyzed to impose customs duties of 10%. This is another step in the fight against the trade deficit after customs tariffs of 25% implemented last week. for goods worth 34 billion USD and another 16 billion USD waiting for launch (probably at the beginning of August). The decision of the White House is not a complete surprise – President Trump warned earlier that if China responded to his duties (and responded on Friday), further sanctions would be prepared. Financial markets vaporized the risk appetite with the greatest damage to stocks, commodities and risk currencies, but there is no wider panic. Beijing, for the time being, withstands the immediate answer and appeals for cooperation. On the other hand, yuan loses today 0.5% and tolerating such a state of affairs by the Chinese authorities will, in a sense, be a retaliatory action. Generally, however, we return to trade on elevated nervousness with the preference of safe havens. Sales of AUD/USD and NZD/USD will be preferred channels within the major currencies; USD/JPY will have to slow down with the aspirations at 112 (through the depreciating stock market); there are also no conditions for the EUR/USD to climb to 1.18. It will be easier, however, for the risk aversion to sparkle under the pretext of every little information.
Let’s now take a look at the Gold technical picture at the daily time frame, as this asset is very often used during turbulent times as a safe-heaven. After the Death Cross formation that happened a couple of weeks ago, the price of Gold is still falling. The recent clear Doji candle at the technical resistance at the level of 1.261 is an indication, that bears are still in control of the market and they will try to test the technical support at the level of 1,236 again. The weak momentum supports the bearish outlook.