Forex Market Analysis

Daily: Markets are Calmed Ahead of a New Fresh Wave of U.S Tariffs






The U.S.-China trade spat will likely remain a key driver of sentiment this week ahead after reports said U.S. President Donald Trump wants to move forward with tariffs on $200 billion in Chinese goods.

U.S.-China trade-war fears have been simmering for months. Neither side is showing any signs of backing off, fueling worries that the world’s two largest economies are spiraling towards a trade war that could shake the global economy.

Besides trade rhetoric, the U.S. will see a relatively quiet week in terms of economic releases, with a report on the housing sector expected to draw the most attention.

The tariff level will probably be about 10%, as the Wall Street Journal reported, quoting people familiar with the matter. This is below the 25% the administration said it was considering for this possible round of tariffs. The decision comes despite a Treasury invitation last week to senior Chinese officials, including Vice Premier Liu He, for further negotiations to reach a calm resolution of this matter. Trump has demanded that China cut its $375 billion trade surplus with the United States, end policies aimed at acquiring U.S. technologies and intellectual property and roll back high-tech industrial subsidies.

On other hand, in spite of disappointing inflation and retail sales data released on Thursday, the USD Index managed to recover some of the lost ground afterwards, closing the previous week with indecisiveness about future moves. However, such a recovery is expected to be short-lived as the underlying economic indicators lack of the strenght to represent any serious impact on monetary policy. In fact, last week we experienced a typical case of market participants using fundamentals as means to print more liquidity and to reposition themselves by given economics a contrarian reading





On the daily chart, the price was moving strongly in ascending channel towards the key resistance 0.91 then it dropped to 0.8895 due to

1- breaking beneath the channel after completing the wave 5 (Eliot waves)

2- the AB=CD harmonic pattern

3- the overbought on RSI

The price is about to reach 0.8845 where the descending trend and moving average 200 collide

Then, it may retrace to the resistance 0.9025 before heading the C wave target at 0.873




On the daily chart, the pair has reached decisive resistance levels, as the zone 1.7165-1.7065 pushed the price lower along with the upper side of the descending channel from the high of 2018

An AB=CD harmonic pattern has been completed as the price stopped at the B level which is located at the same zone spot

An ascending channel had been formed as a reversal flag besides a divergence on RSI to reinforce the bearish bias to the support 1.657



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