Smart traders are always on the lookout for political and economic news that can disrupt technical analysis, and US President Trump has made quite an impact over the last 12 months. Trump’s Trade War is affecting the global supply chains and any insights into the coming quarter can give currency traders a significant advantage. Here’s the situation right now along with some predictions that will likely affect USD prices.
Asian markets drop
The Trade War and the imposing tariffs are starting to take a toll on the Asian economy. Tokyo's Nikkei 225 dropped 0.2%, Hong Kong's Hang Seng also fell by 0.9%, and the Shanghai Composite Index fell by a staggering 1.1%. The losses across the Asian markets will surely affect China’s leverage when it comes to future Trade War negotiations, and Trump might find himself on high ground with an opportunity to take advantage very soon.
China set the stage for a settlement in early June, stipulating that the conditions for an agreement must be “balanced” for both nations. They rejected—what China called—a “one-sided deal” that would keep punitive tariffs on all Chinese goods and favor the US in the intellectual property disputes.
Trade War talks reopen
Finally, presidents Trump and Xi Jinping have agreed to resume talks and will meet this week at the G20 in Japan, but the meeting will be brief and it seems unlikely that they will iron out all their differences in one sitting.
Conflict over technology and trade surplus continues to feed growing international trade fears that are now circling the globe. Washington’s sanctions on Chinese tech giant Huawei and the national security hype are still dominating the headlines, fueling the discord along with rumors that the restrictions may extend to all Chinese tech companies in the coming months. Don’t expect news releases that can indicate or affect market sentiment just yet.
Trump needs a win
While the United States election is not until next year, campaigning season is already underway, and if the Trump administration hopes to have another term, it is going to have to start mending bridges soon. Putting an end to the Trade War will surely increase Trump’s chances of re-election, and given China’s current concerns, Trump has an excellent opportunity to reach an agreement that will favor the US.
What to expect in Q3
USDCNH made a rapid fall to 6.8500 between June 18 and June 20, but a classic reversal quickly followed. A short rising trend is currently underway, and with China’s markets showing weakness and Trump’s current motivations, it seems a Buy order is worth further investigation.
Assuming Trump keeps a cool head in the coming weeks and lays down the foundation for a solid agreement, USD sentiment may continue to rise, and possibly even return to the 6.9200—6.9400 range that has dominated the last few months.
Trade USDCNH during the US-China negotiations
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