The trade tensions between the US and China appear to worsen as each day passes. The US is now planning to limit Chinese investments in US technology companies. Chinese President Xi Jinping has vowed to fight US President Donald Trump blow-for-blow as a trade war between both superpowers appears unavoidable. The first round of US tariffs imposed on Chinese imports will take effect on July 6th while another $200 billion could be added if China decides to retaliate. There is little doubt that China will match the tariffs.
Both Presidents are nationalists and it is unlikely that either will back down from the tough talks over the past few weeks. The EU is under threat as well as the Trump administration will apply a 25% tariff on steel imports and a 10% tariff on aluminum imports. The EU plans to retaliate by imposing $3.3 billion worth of tariffs on US imports starting June 29th. This has already prompted Harley Davidson to shift production for Europe outside the US while Jack Daniels owner Brown-Foreman stated that whiskey prices in Europe will increase by 10%.
EU Commission Vice President Jyrki Katainen met Chinese Vice Premier Liu He in Beijing yesterday and both vowed to defend the global, free, multilateral trading system against protectionism. VP Liu stated that 'Unilateralism is on the rise and trade tensions have appeared in major economies. China and the EU firmly oppose trade unilateralism and protectionism and think these actions may bring recession and turbulence to the global economy.’ While China and the EU are on the same side when it comes to US tariffs, they are at odds over the lack of EU support of China’s Belt & Road initiative which promotes trade and infrastructure along the ancient Silk Road which used to connect the East to the West.
The EU and China warn that a trade war will initiate the next global recession and a trade index created by the CPB Dutch Bureau for Economic Policy Analysis shows world trade momentum turning negative. Is a global recession on the horizon? Are you ready to profit from price action moves as the forex market reacts to the pending economic issues? Open your PaxForex Trading Account now position your portfolio with the help of our expert analysts.
At the close of the Asian trading session, the Chinese equity market entered a bear market which is classified as a contraction of 20% or more from its highs. The Chinese Yuan is trading at a six-month low and market participants expect more downside from current levels. According to China Vision President Sun Jianbo, 'Pessimism will keep growing as many companies are on the edge of margin calls and bond defaults'. Will other Asian markets follow suit and enter bear markets over the third-quarter and will it spill over to the rest of the global economy? Is you forex portfolio positioned and hedged properly? Is a global recession on the horizon? Here are three forex trades to own.
Forex Profit Set-Up #1; Sell USDTRY - W1 Time-Frame
The strong advance in the USDTRY was halted following President Erdogan’s presidential as well as parliamentary election victories. As the US and China are weeks away from the first round of tariffs being applied, forex traders are set to take profits and reduce US Dollar exposure. This currency pair has retreated below its horizontal resistance area which is expected to attract a wave of sell orders amid a profit taking cycle. Placing sell orders just above and below the lower band of the horizontal resistance area is recommended.
The CCI formed a negative divergence while it was trading in extreme overbought territory which is a strong bearish trading signal. The indicator has now broken down below the 100 mark which resulted in an increase in bearish sentiment. Download your PaxForex MT4 Trading Platform now and enter the USDTRY currency pair to you account before it will accelerate to the downside.
Forex Profit Set-Up #2; Sell EURMXN - W1 Time-Frame
The Eurozone is slowing down which will increase downside pressure on the Euro. While Mexico is in NAFTA renegotiations, it is poised to benefit from US production relocation out of the US into Mexico in order to skirt US sanction on the EU. The EURMXN already completed a breakdown below its horizontal resistance area which cleared the path down to its ascending support level. Forex traders are advised to sell any potential rallies in this currency pair which carries attractive downside potential with limited upside risk.
The CCI contracted from extreme overbought conditions into neutral territory, but bearish momentum may suffice to extend the slide below the 0 level. This would result in a sentiment shift from bullish to bearish in the EURMXN. Follow the PaxForex Daily Forex Technical Analysis and receive the best technical trading set-ups from our expert analysts.
Forex Profit Set-Up #3; Buy Silver - MN Time-Frame
Silver has been stuck in a very narrow trading range for over two years, but as the risk of a global recession increases Silver looks attractive for a breakout. In addition the US Dollar is poised for a retracement of its most-recent two-month rally and commodity price often have an inverse relationship to USD price action. Forex traders are recommended to spread their buy orders inside the horizontal support area and wait patiently for a breakout to materialize over the summer months.
The CCI enjoys a shallow upside trajectory following a brief dip into extreme oversold territory. A move above the 0 mark by this momentum indicator is expected to ignite a massive advance in Silver. Subscribe to the PaxForex Daily Fundamental Analysis and let our expert analysts guide you through the forex market from a fundamental perspective. Earn over 500 pips per month simply by following our trading recommendations.