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Tradewar

Trading Gold Futures Amid Global Trade TensionsCOMEX: Micro Gold Futures ( COMEX_MINI:MGC1! ) #Microfutures The United States will be implementing new tariffs on Saturday, February 1st, including 25% tariffs on Mexico and Canada as well as a 10% duty on all goods from China. These countries are the Top 3 U.S. trading partners, contributing to 40% of all goods and services imported into the US in 2023, collectively. On Friday, gold prices surpassed the key $2,800 mark for the first time ever. Spot gold rose 0.6% to $2,810.55 per troy ounce, after hitting a record high of $2,817.23. The record rally is fueled by a flight to safety as trade tensions rise. Gold futures are trading at a premium to spot gold prices. The lead April contract of the benchmark COMEX gold futures settled at $2,833 on Friday. Looking back, the trade tensions between the US and China have intensified since 2018. This time, higher tariffs will be applied globally, not only to competitors of U.S. interests, but also to close allies such as Canada, Mexico and the European Union. Lessons from the US-China Trade Conflict How would the global trade conflicts shape up? Uncertainties remain elevated. Luckily, the US-China trade conflict provides us historical lessons with present-day relevancy. Let’s have a quick review of the major timeline of key events: • July 6, 2018: The trade conflict begins as the US imposes 25% tariffs on $34 billion worth of Chinese goods. China retaliates with tariffs on an equal amount of US goods. • August 23, 2018: The US imposes additional 25% tariffs on another $16 billion worth of Chinese goods. China responds with tariffs on $16 billion worth of US goods. • September 24, 2018: The US imposes 10% tariffs on $200 billion worth of Chinese imports. China retaliates with tariffs on $60 billion worth of US goods. • December 1, 2018: A temporary truce is agreed upon during the G20 summit, with a 90-day period for negotiations. • January 15, 2020: The "Phase One" trade deal is signed, easing some tariffs and committing China to increase purchases of US goods. Gold prices responded quickly at each stage of the trade conflict, creating ample trading opportunities. On June 7, 2022, I published “Event-Driven Strategy Focusing on Global Crisis” on TradingView, based on my own trading experience from 2018-19. A link to this write-up is provided here for your information: In summary, I observed patterns in gold prices while the trade conflict was progressing, and designed event-driven strategy based on Game Theory. Here are the highlights: • US initiated new tariffs; Gold prices went up (“Risk On”) • China retaliated with new tariffs; Gold prices went up further ("Risk On”) • US and China announced trade negotiations; Gold prices went down (“Risk Off”) • Negotiations broke down followed by new tariffs; Gold prices went up (“Risk On”) • Negotiations resumed; Gold prices went down (“Risk Off”) • Trade agreement was reached; Gold prices went down sharply (“Risk Off”) The “Fight-and-Talk” could go multiple rounds, pushing tariffs to higher levels. Just how high? China previously maintained a 12% import tariff on U.S. pork products. In its first round of trade retaliation in 2018, China imposed an additional 25% tariff on US pork. A month later, another 25% was added. Pork tariff went up a further 10% in the third round of retaliation, making the total tariff on US pork at a mind-boggling 72%! As shown in the chart, gold responded in an observable manner following each key event. This repetitive pattern made it possible to set up trades in anticipation of the next moves. The Sequence of Next Moves in Trade Conflicts Learning from the previous experience, we could simulate a series of scenarios when new tariffs are imposed on goods from Canada, Mexico, China and the EU. • US initiates new tariffs; Gold prices go up (“Risk On”) • The other country retaliates with new tariffs; Gold prices go up further ("Risk On”) • The two countries announced trade negotiations; Gold prices go down (“Risk Off”) • Trade agreement is reached; Gold prices go down sharply (“Risk Off”) In my opinion, the countries involved would retaliate but may want to avoid a costly trade conflict dragging on. With the brutality of the last trade conflict still fresh in mind, trade deals could be reached more quickly. From a trading perspective, the Fight-and-Talk patterns could be repeated multiple times, making our event-driven strategy reusable. Given that Canada, Mexico, China and the EU are the biggest U.S. trading partners, the price swing in gold could be more volatile. Conflicts with smaller trading partners, such as Taiwan and the Southeastern Asian countries, may not trigger big moves in gold. The CFTC Commitments of Traders report shows that on January 28th, total Open Interest (OI) for Gold Futures is 577,505, up 15% from the level last November when the U.S. election was held. Interest in using gold for trading or hedging goes up with the escalation of risk. “Swap Dealers” own 363,051 contracts, making them the largest trader category to own gold futures positions. • Swap Dealers have 29,725 in Long, 272,549 in Short, and 60,777 in Spreading • The long-short ratio of 1:9 indicates that “Smart Money” is overwhelmingly bearish There is another supporting factor for a bearish view: A key driver in gold prices is the geopolitical crisis. President Trump announced that he planned to meet with President Xi of China within the first 100 days in office. A meeting between President Trump and Russian President Putin is also being planned. As we know, bullion is a preferred asset during times of turmoil. We may soon see the geopolitical risks unwinding, which will send gold prices sharply down. This could happen when Russia and Ukraine end their military conflict with a peace treaty. Trade Setup with Micro Gold Futures If a trader shares a similar view, he could express his opinion by shorting the COMEX Micro Gold Futures ( AMEX:MGC ). MGC contracts have a notional value of 10 troy ounces. With Friday settlement price of 2,833, each April contract (MGCJ5) has a notional value of $28,330. Buying or selling one contract requires an initial margin of $1,150. The MGC contracts are very liquid. On Thursday, MGC has a daily trade volume of 126,712 contracts and an Open Interest of 30,633. Hypothetically, a trader shorts April MGC contract and gold prices pull back 5% to 2,691. A short futures position would gain $1,420 (=142 x $10). Using the initial margin as cost base, a theoretical return would be +123% (= 1420 / 1150). The risk of shorting gold futures is rising gold prices. Investors could lose part of or all their initial margin. Traders could express the same view with the standard COMEX Gold (GC) futures or the newly launched 1-ounce gold futures, which represent just 1/10 the size of a Micro Gold (MGC) futures contract and 1/100 of GC futures contract. To learn more about all the Micro futures and options contracts traded on CME Group platform, you can check out the following site: www.cmegroup.com The Leap trading competition, sponsored by CME Group, will begin at TradingView on February 3rd. I encourage you to join The Leap and compete to be the best in CME Group futures trading and win a share of $25,000 in cash prizes or an additional six months to your TradingView subscription. www.tradingview.com Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
COMEX_MINI:MGC1!Short
by JimHuangChicago
5
Why Tariffs & Why Now?Trump's tariffs aim to reshape international trade. They target imports from China, Mexico, and Canada starting February 1. The president sees tariffs as both a policy tool and a growing revenue stream. By imposing fees on foreign goods, he hopes to protect U.S. industries and encourage fair trade practices. U.S. manufacturers face an uneven playing field when compared to foreign counterparts like those in Mexico and China, due to differences in regulations and quality controls. For instance, China doesn’t have strict regulations like OSHA, which ensures worker safety and environmental standards in the U.S. Additionally, Chinese manufacturers often don't face the same level of quality control scrutiny that domestic manufacturing companies do. These disparities make it difficult to directly compare commodities, as U.S. manufacturers shoulder higher costs to comply with regulations, while foreign manufacturers benefit from fewer restrictions. As a result, domestic manufacturers and distributors struggle to compete on price, which is one of the reasons tariffs are viewed as protecting national strategic interest. Jamie Dimon, CEO of JPMorgan Chase, in a CNBC interview today from Davos, Switzerland, where the World Economic Forum is taking place said, “I would put in perspective: If it’s a little inflationary, but it’s good for national security, so be it. I mean, get over it.” Citation: www.cnn.com Tariffs are not new to Trump’s strategy. The trade war with China in 2018 established a framework for using tariffs to gain leverage. This latest round builds on that approach, with broader goals for economic influence. Trump has proposed a 10% tariff on Chinese goods. The reasoning ties to China’s fentanyl production and export practices. This decision follows conversations with China’s President Xi Jinping. Trump urged stricter measures against fentanyl production and shipping, linking it to broader trade concerns. American businesses already face up to 25% tariffs on many Chinese imports. These new fees would add further strain to supply chains, raising prices for consumers. However, it will promote domestic manufacturing and bulster this important sector of the economy. Mexico and Canada are also in Trump’s sights. He plans to impose 25% tariffs on goods imported from these neighboring countries. Canadian Prime Minister Justin Trudeau has expressed concerns saying that Canada supplies vital materials like oil, steel, and lumber. He went on to claim that the U.S. Tariffs could disrupt this trade and raise costs for American industries. Both nations aim to avoid direct trade conflict while protecting their economies from potential damage. Trump’s tariffs serve multiple purposes. They are designed to pressure trade partners, reduce deficits, and address what he views as unfair practices. Tariffs also play a role in domestic revenue generation. They are a tax on imported goods, and higher tariffs mean more money for government programs. Economists warn of potential downsides, including higher consumer prices. Some argue that the inflationary effects could complicate the Federal Reserve’s plans for interest rate cuts. Let's explore that further now. What does the data say concerning Tariffs? The ISM Manufacturing PMI (Purchasing Managers' Index) is a key economic indicator that measures the health of the U.S. manufacturing sector. Compiled through surveys of supply chain executives, it tracks new orders, production, employment, supplier deliveries, and inventory levels. A reading above 50 indicates expansion, while a reading below 50 signals contraction. As a barometer of economic activity, the PMI provides valuable insight into broader economic trends and business conditions. Since the second half of 2022, the ISM Manufacturing PMI has been in contraction territory, reflecting ongoing struggles in the manufacturing sector. Factors such as high interest rates, which increase borrowing costs for businesses, and weaker global demand have weighed heavily on production. Tariffs, while aimed at protecting domestic manufacturing, could potentially exacerbate these challenges by raising input costs, further pressuring profit margins. Critics argue that higher tariffs could contribute to inflation, limiting the Federal Reserve’s ability to lower interest rates and support broader economic growth. A strong dollar has also added to manufacturers' woes, echoing the environment during Trump's 2017 inauguration. A strong dollar makes U.S. exports more expensive and imports cheaper, reducing competitiveness for domestic manufacturers. In 2017, the dollar weakened after initial strength leading into the Trump inaguration, providing a temporary boost to manufacturing by making exports more affordable and imports pricier. A similar trend today could aid the sector, but its timing and magnitude remain uncertain, leaving manufacturers navigating a complex and challenging economic environment. A strong dollar is closely tied to domestic interest rates, as higher rates make U.S. financial assets more attractive to global investors. With the Federal Reserve’s benchmark interest rate, or Fed Funds Rate, at elevated levels, there is a strong incentive for multinational corporations and foreign investors to acquire dollars to purchase U.S. Treasuries. These assets offer a combination of safety and competitive yields, drawing capital inflows that drive up demand for the dollar. For instance, the U.S. 2-year Treasury yield currently sits at 4.295%, significantly higher than China’s 2-year yield of 1.26%. This wide yield differential makes U.S. Treasuries a far more appealing investment, strengthening the dollar in the process. The Fed’s success in controlling inflation has further bolstered the dollar's appeal. As inflation trends downward toward the 2% target, the relative stability of the U.S. economy enhances confidence in dollar-denominated assets. This dynamic creates a feedback loop: high interest rates attract foreign capital, which strengthens the dollar, making U.S. exports more expensive and imports cheaper. While this helps curb inflation, it poses challenges for domestic manufacturing by eroding competitiveness. This delicate balance underscores the complexity of managing monetary policy while considering its ripple effects on trade and the broader economy. One bright spot for domestic manufacturing is that it appears to have hit rock bottom after years of sharp declines. Similar to the transportation sector, which shows signs of recovery as reflected in the recent ATA tonnage index, manufacturing seems to be stabilizing. The worst may be over, and the sector is finally showing signs of life. New orders for manufacturing have moved back into growth mode, offering hope for a sustained rebound. This shift signals that demand is returning, which could provide a foundation for manufacturers to rebuild and capitalize on future opportunities.
TVC:DXY
by ZenMode
AUDUSD-The first interest rate cut is postponed until next year?The AUDUSD currency pair is below the EMA200 and EMA50 in the 4H timeframe and is moving in its downward channel. In case of a valid failure of the channel ceiling, we can see the supply zones and sell within those zones with the appropriate risk reward. The loss of the drawn support range will pave the way down for this currency pair. The Australian government’s plan to reform the central bank by splitting its board into two divisions is close to becoming law.Prime Minister Anthony Albanese’s administration is pushing through dozens of bills in the Senate during the final parliamentary session of the year to implement these major reforms. In this process, the government and the minority Green Party reached a last-minute agreement to revive stalled legislation. Previous negotiations had failed because the Greens demanded an immediate interest rate cut by Treasurer Jim Chalmers, which critics argued could undermine the central bank’s independence. Now, with sufficient political support, these long-awaited reforms are set to be enacted soon, potentially reshaping Australia’s monetary and economic policies. Australia’s four major banks—ANZ, Commonwealth Bank, National Australia Bank, and Westpac—have adjusted their forecasts for when the Reserve Bank of Australia (RBA) will make its first interest rate cut. Westpac and NAB now expect this to occur in May 2025, while CBA and ANZ continue to anticipate a February 2025 cut, albeit with caution. The next RBA meeting is scheduled for December 9–10, 2024. S&P Global Ratings, in its outlook for the global economy in Q1 2025, stated, “Risks are increasing as the new U.S. administration’s policies are likely to heighten inflationary pressures and tighten financial conditions.” The agency predicts global GDP growth of about 3% in 2025, with U.S. economic growth dropping below 2% and China moving toward 4% growth. According to Bloomberg, economists anticipate that China’s exports will hit a record high this year as international customers place orders early to avoid potential tariffs threatened by Trump. Meanwhile, Australia, known as a safe haven for heavy-duty pickup trucks, is set to experience its most significant automotive shift in years, with new models arriving, including the first off-road hybrid vehicle from China’s BYD. Australia, famous for its love of SUVs and petrol-fueled pickups, remains one of the laggards in adopting electric vehicles. According to the Australian Automobile Association, EV sales in Q3 dropped by 25% compared to Q2, accounting for just 6.6% of the market—the lowest share since 2022. However, the arrival of new hybrid models like the BYD Shark 6 could transform Australia’s automotive market and boost demand for electric and hybrid vehicles. Meanwhile, a spokesperson for China’s Ministry of Commerce reiterated the country’s opposition to unilateral U.S. tariffs. He urged the U.S. to adhere to World Trade Organization (WTO) rules and emphasized that imposing tariffs would not solve America’s economic challenges. China’s stance against unilateral tariff increases, including those threatened by Trump, remains consistent. On the other hand, the U.S. economy grew at a robust pace in Q3, primarily driven by a significant surge in consumer spending as inflation continued to ease. GDP rose at an annual rate of 2.8% during this period. Consumer spending, the primary engine of economic growth, increased by 3.5%, marking the highest rate this year. According to the GDPNow model, the real GDP growth rate (seasonally adjusted annual rate) for Q4 2024 was revised to 2.7% on November 27, up from 2.6% on November 19. Following the release of the U.S. Bureau of Economic Analysis’ Personal Income and Outlays report, real personal consumption expenditures growth for Q4 was revised upward from 2.8% to 3.0%.
Short
by Ali_PSND
Will the Dollar Index Redefine Global Economic Equilibrium?In the intricate dance of international trade and geopolitical strategy, the Dollar Index emerges as a critical compass navigating the turbulent waters of economic uncertainty. The article illuminates how this financial barometer reflects the profound implications of proposed tariffs by the U.S. administration, revealing a complex interplay of currencies, trade relationships, and global market sentiments that extend far beyond mere numerical fluctuations. The proposed tariffs targeting key trading partners like Canada, Mexico, and China represent more than economic policy—they are strategic maneuvers with potential seismic shifts in global trade dynamics. As the Dollar Index climbs, reflecting the U.S. dollar's strength, it simultaneously exposes the delicate balance of international economic relationships. The potential consequences ripple through supply chains, consumer markets, and diplomatic corridors, challenging the post-World War II trade paradigm and forcing nations to recalibrate their economic strategies in real time. Beyond the immediate market reactions, these developments signal a broader philosophical question about economic sovereignty and interdependence. The tariff proposals challenge long-established multilateral agreements, potentially accelerating a transformation in how nations perceive economic collaboration. While the immediate impact is visible in currency fluctuations and market volatility, the long-term implications could reshape global economic architecture, prompting a reevaluation of the U.S. dollar's role as the predominant global reserve currency and testing the resilience of international trade networks.
INDEX:DXYLong
by signalmastermind
Can Japan Weather the Semiconductor Tempest?In the intricate landscape of global semiconductor trade, Japan's recent decision to restrict exports of chipmaking equipment to China has ignited a tempest of geopolitical tensions. The move, while intended to limit China's technological advancements, risks triggering severe economic retaliation from Beijing. As a leading player in the semiconductor industry, Tokyo Electron finds itself caught in the crossfire, grappling with the potential consequences of this escalating dispute. The semiconductor industry, a cornerstone of modern technology, is intricately intertwined with global economies. Disruptions to the supply of advanced chipmaking equipment could have far-reaching consequences, affecting industries from automotive manufacturing to artificial intelligence. The potential for economic retaliation from China, a major market for Japanese exports, further complicates the situation. Japan's decision to impose export controls is driven by a strategic imperative to limit China's technological capabilities. However, this strategy carries significant risks. China has responded with a strong warning, threatening severe economic retaliation. The broader geopolitical context further complicates the situation, as the United States and its allies have been working to limit China's technological advancements. The question remains: Can Japan successfully navigate this delicate balancing act, maintaining its economic interests while adhering to its strategic objectives? The answer to this enigma will likely shape the future of the semiconductor industry and the global technological landscape for years to come.
NYSE:TELShort
by signalmastermind
TSL A - Gamma FadeIncreasing desperation in Calls as the TSLA P/C heads to lows. Share Volume is being driven by the same group of De-Gens as last week. Gamblers eyeballing the 900s. Institutions eyeing the 629 - 658s. A compelling SELL in our opinion. Same game, different day. AMC reports today, the RTY should be smoke house on the Pump into $14 Popcorn. A tale of desperation as Rate Sensitive TECH isn't ready for a large retracement in 10Yr Yields. The Federal Reserve clearly overstepped its Credibility with YCC and CONfidence. A large selloff in TECH continues to be setting up. We are positioning for the final push into the SELL. Can the Riggers hit 15364? We shall see, it is a clear SELL up to this level. Inflation Data this week will keep things range bound until ZN decides there is a decided need to begin an all-in strategy for SELLERs.
INDEX:PCTSShort
by HK_L61
1
Global Quad 2I want to apologize for my lack of activity the past few months. A lot has changed in the markets and a lot has evolved in my approach to reading and navigating the markets. When it comes to my process, I have added the use of multiple lenses beginning first with a fundamental macro overlay called the GIP (Growth, Inflation, Policy) Quad Model, which give us 4 possible macroeconomic environments on a rate of change basis that we are in and could be headed towards. This model protected investors in advance of the 2020 crash with big positions in cash, bonds, and puts and it had its users in Gold and TLT from 3Q2018 until 3Q20. This model also has its users begin shorting USDs and buying commodities and Emerging markets beginning in May 2020. It is impossible to be perfect in markets and the model has made mistakes but overall it has convinced me it is a model worth using and paying attention to. Currently the GIP Model is showing the global economy already in Quad 2 and headed towards a Deep Quad 2 topping out by the 2nd quarter of 2021. Quad 2 is the macroeconomic environment where both economic growth and inflation are accelerating simultaneously. What many equity bears, bond bulls, and gold bulls are missing is that in 1Q20 the global economy hit rock bottom and there is only one direction out of an absolute rock bottom. Whether that's going sideways, a slow grind higher, or a better than expected recovery, all of those outcomes give us something that is better than what the economy was in the March of 2020. It is all about the Rate of Change, this is what the market cares about. Yes, we are in a recession, but the direction the economy is headed right now is different than the direction it was headed in at the start of 2020. On the Margin, a Biden-Kamala administration means: - Less trade war with both allies and foes. A move away from nationalism and isolationism. - Continued push for more stimulus - Giving the Federal Reserve the power to spend not just lend. Retail Central Bank accounts with digital currency stimulus checks etc.. - Possible stimulus directly from the executive branch - Republicans forget that Biden and Kamala are corporatists first and foremost and not nearly as far left as Fox news says. So, this means $DXY continues its downtrend, potentially hitting 80, 70, and maybe a new all-time low over the next 4 years. In the short-term, DXY's trend range is 91-88. Many Gold Bulls are confused why Gold and Silver haven't rallied to new highs despite DXY dropping to new lows, and the reason is because yields have risen alongside expectations for slightly better growth in 2021, higher growth expectations means investors will want to take on more risk in stocks and commodities over yield-sensitive safe havens like bonds and precious metals. AT THE SAME TIME, I still think silver miners and junior miners can do alright in Quad 2 even as the metals themselves stagnate because the amount of money the miners are making is pretty ridiculous. The miners that are well-positioned to expand production into an elevated gold price environment will have accelerating earnings which makes their stock attractive. An example of such a stock is $AUMN Golden Minerals. You really can't go wrong with anything in the commodities. Since the election energy, materials, and industrials have been great places to be. I think energy will continue to be a strong winner. That includes USOIL, Natural Gas, and Uranium. I think the agriculture complex can surprise to upside, including oranges, cocoa, coffee, and cattle. And the Covid losers, in general, will continue to outperform the Covid winners if yields continue to rise (study the US10Y) which is spurred by increases in expectations for future growth and inflation. This is why Copper has been smoking gold lately. Another way to play the steepening yield curve, is $IVOL, which is a low volatility and asymmetric way to play interest rates if you think bonds are overpriced. So to summarize: Bearish on bonds until Q2 of 2020, Bullish on global equities, Bearish on the US Dollar, Bearish on VIX, and on the margin bearish gold and neutral on silver, but bullish on some of the well-positioned gold and silver equities. Once this Quad 2 growth peaks in Q2, or maybe the model output pulls the probability forward of growth peaking in late Q1, whenever that point ends up being we will pivot towards being long gold and silver and shorting Chinese stocks, Oil, Russell 2000, Nasdaq, Financials, etc. but that will be later in 2021 with a Quad 3 or 4 environments (Quad 3 rising inflation falling growth, Quad 4 Falling inflation falling growth). Basically the bullish case is this: - Economy hit rock-bottom in March - Fed overshot monetary policy by a mile - Fiscal stimulus was like 10x the 2009 Fiscal stimulus - A lot more stim is on the way with Biden-Kamala - Biden-Kamala also means more global trade, less volatility in foreign policy - Travel restrictions become loosened as vaccine distributions take place - Highly unlikely that most of the USA and most of the world ever sees anymore covid shutdowns
TVC:US10YLong
by Ludwig_Von_Mises
AUD/CAD Short-Sighted Bull RallyLet's think about this. The Australian Dollar is considered a risk-on asset who has high trade tensions with its biggest trade partner. Risk-on Equities are falling, so why shouldn't the AUD fall too. Well, the market is short-sightedly buying over the good CPI numbers which are front-loaded. I expect to see the AUD fall more in line with other risk assets. Of course, this rally is partially due to CAD weakness as well (due to oil), but the CAD is a safer asset than the AUD. Remember I am not your financial advisor.
Short
by TogamiTrader
XLF- Mac-D serving as an early buy signal.AMEX:XLF has seen some channel trading from 2018 too early this year. Finding its range peak in February of 2020 it crashed hard and has been working it's way up since. In red and green (A-D) are the main support and resistance levels and I have noted on the MAC-D where price has reversed, and also accounted for some major financial events such as the Chinese trade war and COVID-19 pandemic. XLF seems to have found its new channel and will either retest its support on the downside and hold the channel or test the SMAs as resistance on the upside and possibly find its way into the former price range leading up to the election. I am going to use MAC-D as my signal to buy as we near a cross.
AMEX:XLF
by crawfordpaul
RidetheMacro| USDCNH Market Commentary 2020.09.22✅ The optimistic numbers have proved that the world’s second largest economy is steadily recovering from the virus slump. Notably, the pair has already been falling for the 6th week in a row, therefore the report has just added tailwinds to the yuan. Moreover, the massive sell-off of the USD pushed the pair to the downside as well 📉. 📌 It’s impossible to ignore the US-China complicated relationship. There was some sign of improvement after the report of the successful phone call between two countries Recent weeks. China and the USA have promised to obey the phase-1 trade agreement, that encouraged investors. Nevertheless, there is still some uncertainty ahead of the election of the US president in November, which may significantly affect Sino-American relations. other side 📍 The Chinese central bank, the PBoC, kept the 1Y Loan Prime Rate at 3.85% and the 5Y Loan Prime Rate at 4.65%. The last time the central bank cut rates was in March.
Short
by Ridethemacro
USD CNH - Escalation of Tensions !Relationships between the U.S and China have been deteriorating at a really fast pace since the begging of the Trade War between both countries back in 2018, where hundreds of billions of dollars in taxes over nationals goods, were exchanged. Despite the escalation of tensions, Trump's primary goal was to try to please the agricultural sector, since the farmer's states integrate a meaningful part of its electorate, so aiming re-election the promise of China in boosting its purchases of U.S agricultural goods served Trump needs. However, the disastrous response of Trump to the COVID-19 outbreak in the U.S and other domestic crises has put its chances of re-election in jeopardy. With almost 3 million cases confirmed and more than 130,000 American lives ended, plus the massive riots across the country due to the murder of George Floyd by cops and the economic crisis that is hitting the country with an unemployment rate of 13.3%. A context that has been causing the growth of the dissatisfaction of the population with the state of the country, such discontentment is already appearing on the recent polls that put the Democrat candidate Joe Biden in a 10 points lead over Trump. With the risk of losing re-election, Trump might use the oldest trick of the book of governors that want to unify the country and take the focus off its own failures, create a common enemy. In this case, China its the perfect fit, since the country was the first to report the new Coronavirus and has been moving to curb Hong Kong autonomy through the new security law. So Trump can target China first by blaming the country over the pandemic, and retaliating in defense of Hong Kong democracy, placing then meaningful sanctions and increasing the friction between both countries. Looking at the monthly chart, the US Dollar Chinese Yuan Offshore is in a very intrigue spot now since the price is moving accordingly to the Elliott Wave rules so far, with a Wave 3 in process of formation. After the price confirmed a Wave 2 due to the retracement of near 76.4% of Wave 1, the CNH managed to surpass the top of Wave 1 confirming a possible Wave 3 that has the following targets based on the rules that determine the extension of this wave: Targets: 1) 7.80869 - 161.8% of wave 1-2 2) 8.18008 - 200% of wave 1-2 3) 8.78091 - 261.8% of wave 1-2 4) 9.38174 - 323.6% of wave 1-2 This context shows us the possibilities of this new large impulse movement of the USD CNH been the reflection of the rasing of tensions between China and the U.S, as China will fight to increase the yuan relevance on the market as the U.S will try to undermine China influence on the global economy. Thanks for reading, please feel free to share your comments and perspectives below, I'm still grinding my way to improve my analysis, so all feedback is welcome. "A crisis is an opportunity riding the dangerous wind" - Chinese Proverb
Long
by Ikaro_Soares
USD/RUB, targeting 77.174 (big move coming)Backdrop Rapidly escalating trade war tensions between US and China and concerns on a potential second wave of covid-19 continue to linger. President Putin faces many challenges domestically, and his policies could ultimately impact the direction on the ruble. Trouble at home Russia is struggling to contain covid-19 at home and is on track to remain top 3 in the number of confirmed cases. While the death toll of 3,388 is significantly lower than most EU countries, I would take this figure with a grain of salt. In fact, the same view can be applied across all countries as every government classifies the deceased in a different way. Nevertheless, over the past month, President Putin announced the gradual easing of restrictions, with local governors given the ability to decide on implementations and timelines. This is slightly uncommon given how tight Putin has run his ship, but also a strategic move on his part given that he could shift the blame on local governors should there be a rise in infections. It's noteworthy that President Putin's approval rating is already at its lowest since his inauguration in 1999. Given that Russia is heading towards its most serious recession since 1998, his base of support could decline further in the next several months. Putin's administration can take all the credit if easing plans bode well for the economy. China - Catch 22 Russia has built strong ties with China over the past decade amid deteriorating relationships with the West. President Putin cannot afford to take the same stance as US President Trump on blaming China's alleged mishandling of covid-19 given China is its biggest strategic partner and hedge against the US and EU. What can Russia do? Putin could either divert attention by increasing geopolitical tensions (vis-a-vis Crimea type of move). However, such a bold strategy could do more harm than good. The only way out seems to be shifting focus towards structural and regulatory reforms, and reducing corruption. In fact, there is more incentive to diversify its economy now given the sharp drop in oil prices. However, Putin's administration has yet to deploy massive fiscal support (as seen by other countries). I suspect this will come towards the end of the year; the reluctance may have to do with timing of the referendum (his political plan is to remain as Russia's president potentially until 2036). Rate cut implications Last month, the Central Bank of Russia (CBR) lowered its rate by 50 bps to 5.50% in line with market expectations, while signaling for more cuts to come to reduce recessionary risks. The pair retreated in response to CBR's dovishness and rate cut. At this stage, I don't see rate cuts as a big deal given every central bank is easing, so long as the CBR's word remains credible. If the latter does not hold, currency interventions may be required to stop RUB depreciation. Technical analysis I believe we are in favor of a move higher in the pair as we breakout from a descending triangle pattern. There are plenty of shorter time frame technical analysis on the pair - that's not the ultimate focus here, but rather to take a directional view based on fundamental analysis. Risks / opportunities On the contrary, RUB could be one of the most attractive EM plays if Putin's administration can weather the storm and implement comprehensive economic reforms. Currently, I am not of that bullish view, particularly on the backdrop of covid-19, while any heightened tensions between the US and China is a negative for RUB. As such, targeting near April highs of 77.174 as an initial target with stop loss set (at 69.946) under the support zone of around 72.700.
Long
by Miloslaw
6
USDCHF is Approaching a Level That Should Scare the BullsThe rally from wave c of Y low on 16th Jan 2020 has been unfolding as a double zigzag corrective wave. Corrective structure moves in the opposite direction of the major trend, that's once the wave y of X is completed, the bearish trend should resume. I'm anticipating the correction to complete at the daily resistance zone that lined up with the moving average. Watch out for bearish price action signals from that zone to confirm the completion of correction. What's your thought on USDCHF?
Short
by Veejahbee
USD INDEX Is Setting Up for Potential DeclineThe decline from 99.66 unfolded as a leading diagonal structure, labeled i-ii-iii-iv-v. According to Elliot Wave theory, leading diagonal always point toward the direction of the major trend. Also, once a five-wave impulse is completed a three-wave retracement follows. In the Dollar Index case, the corrective pattern seems to be unfolded as a w-x-y double zigzag and has fulfilled the requirement. Confluence that the price is also sitting at a resistance zone and approaching 78.6 Fib, a bearish reversal is imminent. While the 99.66 invalidation level remains intact, watch out for bearish price action signal from the resistance zone. The breach of the Flag channel or blue horizontal line will confirm the bearish setup. What's your view on Dollar?
TVC:DXYShort
by Veejahbee