Heading South

Asian markets slump on threats of increased tariffs on China

Asian markets plunge today after US President Trump threatened to more than double tariffs of US$200bn on Chinese imports from 10 percent to 25 percent. The Wall Street Journal reported that China considers canceling the trade talks scheduled for this week following Trump’s tweets.

The Hang Seng benchmark in Hong Kong finished 3.24 percent lower at 29,108. The Shanghai Composite sunk 5.83 percent to 2,898, while in Singapore, the FTSE Straits Times index finished 3.23 percent lower at 3,282. Australian equities also took a hit slumping by 0.9 percent due to threats of increased tariffs on China. All sectors lost ground today with around 80 percent of companies finishing in negative territory. Japan completes today its final day of the 10-day holiday, and markets will open tomorrow, Tuesday.

AUDUSD Daily Chart
AUDUSD Daily Chart

European session started with heavy losses mirroring Asian indices and US futures which are down by around 1.5 percent currently. DAX30 is 1.82 percent lower to 12,184 and CAC40 is 2.02 percent lower at 5,435 while the FTSE MIB in Milan is trading 1.72 percent lower at 21,333. The London Stock Exchange is closed for a bank holiday.

In commodities markets, crude oil plunged over 2 percent, and as of writing, the black gold is trading at 60.50 after Trump’s threats to China and geopolitical tensions after the US dispatched bombers and an aircraft carrier to the Middle East over the weekend regarding concerns that Iranian proxy forces were preparing to possibly attack U.S. forces in the region. Brent oil also gives up a dollar at $69,10 per barrel. Gold holds the 1280 level after the rebound from lows on Friday. XAUUSD’s technical picture is negative and now the support stands at the 200-day moving average down to $1251, which if broken can accelerate the downward move to 1200 as sellers will take full control. Strong resistance stands at 1291 and the 100-day moving average, and then the $1300 round figure.

In cryptocurrencies market, Bitcoin (BTCUSD) whose market capitalization accounts for more than half of all other cryptocurrencies combined trades higher for a third straight day at 5,614 mark making new high and further enhancing the bullish outlook. The daily low for BTC was at 5,552 and the daily high at 5,773. BTCUSD immediate support stands at the 200-day moving average at 5,067 while the next strong support stands at the $5,000 level and then at the recent low at 4,937. On the upside, strong resistance stands at 5773 the recent high. Ethereum (ETHUSD) is giving up two dollars at 157 but holding above the 50-day moving average at 138, and facing the immediate resistance at 185, the 200-day moving average, while Litecoin (LTCUSD) trades lower at 71.54. The cryptocurrencies market cap holds above $170.0B.

On the Lookout: The week ahead will be very interesting for traders after President Trump’s tweet, threatening tariffs hike on the Chinese imports. This week traders also await two key interest rate decisions from the Reserve Bank of Australia and New Zealand. In Central Bankers speeches we have at 13:30GMT, the FOMC member Harker and The Bank of Canada Governor Poloz speak later at 17:45GMT also head of the US central bank, and Jerome Powell will deliver a speech in the coming days.

Trading Perspective: In fx markets, we had gaps everywhere at the open across all pairs, the US dollar is down 35 cents to 97,35 from Asian high at 97.65 as traders digest the developments in US-Sino trade war. A stronger US dollar will likely increase the US trade deficit, adding risks that the Trump administration continues to target those nations with a significant trade surplus with the US (China – Germany – Europe). The Aussie dollar trades lower at 0.6987 at fresh 4-month lows after disappointing macro data, and the cash rate futures now see a 71.0% probability of a rate cut in the RBA meeting. Kiwi mirrors Aussie dollar lower and trades at 0.6618 as traders renewed RBNZ rate cut bets following New Zealand’s jobs data disappointment and weaker oil prices.

GBPUSD retreats from tops at 1.3169 amid Greenback strength and trades at 1.3015. On the downside, major support will be found at 1.2967 where the 200 and 100-day moving averages cross and then at 1.2830 the support line from February. On the upside, immediate resistance stands at 1.3104, the 50-day moving average.

In Pound futures markets, traders added 4.800 contracts to their open interest positions on Friday following three consecutive daily pullbacks, the volume rose for the second session in a row, this time by more than 36,000 contracts.

EURUSD trades in a narrow trading range below the 1.12 figure after the dovish stance from Fed last week. The pair made the Asian high at 1.12 and the low at 1.1171. Immediate support can be found at 1.1180, the 200 hours moving average, while more solid support can be found at the yearly low at 1.1115. On the upside, the immediate resistance stands at 1.1236, the bottom of the horizontal resistance line from the three-month trading range, while more offers will emerge at 1.1268 at the 50-day moving average.

In the euro futures market, open interest declined for the second session in a row on Friday, this time by nearly 3.5K contracts while volume extended the up move and rose by around 41.5K contracts.

USDJPY started the week with a gap down on renewed China-USA trade worries to 110.27 and from that time started a rebound to 110.70. Today the pair hit the low at 110.27 and the high at 110.84. The pair will find support at 110.27, the March 2019 low. On the upside, immediate resistance for the pair stands 111.68 the 50-hour moving average and then at 112.18, the April 2019 high.

In Yen futures, the open interest rose by just 292 contracts on Friday while volume increased by more than 22.1K contracts.

USDJPY Daily Chart

USDCAD is the winner for the second day as it trades at 1.3475 as lower prices in crude oil seem to have added further weakness in the Canadian Dollar (CAD). The pair will find immediate support at the 100-day moving average around 1.3335 while extra support stands at 1.3300 round figure. On the upside, immediate resistance stands at 1.3493, the Asian session high, while a break above can escalate the rebound towards 1.35 round figure.