ASIAN MARKETS FALL AS CHINA HALTS TRADE TALKS WITH US
Asian markets declined today after China halted all trade talks with the United States. The latest development came less than a week after the US initiated a 10% tariff on Chinese goods worth more than $200 billion. China responded by raising tariffs worth $60 billion on American goods.
After weeks of major gains, sterling fell sharply after the European Union rejected Theresa May’s Chequers deal. In a statement, EU negotiators told May that her plan ‘won’t work’. This was a setback for pro-EU members who were hopeful of a new deal. The decline of the sterling was also a setback to sterling’s bulls, who had just received better-than-expected inflation and retail sales numbers. Today, the Bank of England (BoE) will release the Financial Stability Report (FSR), which will give an update on the status of the economy. Industrial trends data from the Confederation of British Industry will also be made available.
The euro declined today during the Asian session as traders wait for the business climate data from Germany and a speech from European Central Bank (ECB) president Mario Draghi. Ifo data is expected to show that the business climate in Germany was at 103.2 in September. This will be lower than the August climate data of 103.8. This year, the business climate data has been lower than last year because of the ongoing trade conflict between the US and its rivals and allies.
On Friday, the EUR/USD pair reached a high of 1.1802, which was the highest level since June this year. Today, it fell to an important support of 1.1740 during the Asian session. As the decline happened, the momentum indicator fell below the 100 level on an hourly chart but is currently rising. The MACD too fell below the neutral rate. With no major data from the US and EU expected today, the pair will likely remain within the range of 1.1800 and 1.1740.
Last week, the sterling rallied and reached a high of 1.3298. This was the highest level since July this year. On Friday, it fell sharply after hopes of a Brexit deal faded. Today, it is trading at 1.3075. From a technical perspective, this decline was expected because the pair had just ‘completed’ the cup pattern, meaning that the handle pattern was inevitable. While the previous upward trend could continue, if it falls further, it will test the support of 1.3040.
On Friday, gold declined sharply to a low of $1190. Today, the XAU/USD pair traded within this narrow range during the Asian session, even after a bullish feature by Barron’s. On the daily chart, the current level is slightly below the 23.6% Fibonacci Retracement level. The current price is also along the 28 and 14-day EMA. There is a likelihood that the pair will trade above the 1200 level as traders wait for the Fed decision later this week.