A wave of risk aversion swept across financial markets after Donald Trump threatened to escalate tariffs on $200 billion of Chinese goods this Friday.
This unexpected move caught investors completely off guard with the shock reflected across global equity and commodity markets on Monday. With risk aversion set to intensify as renewed US-China trade tensions fuel concerns over slowing global growth, investors are likely to scatter away from riskier assets to safe-haven investments like the Japanese Yen, Dollar and Gold.
USDJPY gaps below 111.00
The USDJPY commenced the trading week with a large gap down on Monday morning thanks to Donald Trump. Concerns over trade tensions sent investors rushing towards safe-haven assets like the Japanese Yen. The currency pair is under pressure on the daily charts with Yen strength potentially sending prices towards 110.00 in the short to medium term.
EURUSD presses against 1.1200
There seems to be an ongoing struggle for the EURUSD to push back above the 1.1200 resistance level. Although prices remain bearish on the daily charts, a technical correction could look likely once 1.1200 is breached. However, if this level proves to be a reliable resistance then prices are set to test 1.1130 and 1.1100, respectively.
Dollar creeps higher post US jobs report
King Dollar struggled for direction on Monday despite Trump’s tariff threats fuelling risk aversion. The lack of action seen in the Greenback could be based on investors digesting last week’s mixed US jobs report. Although the US labor force continues to display resilience, wage growth remains a sore spot for the Federal Reserve. Investors will most likely direct their attention towards Jerome Powell’s speech later in the week for more insight into interest rate timings. Should the central bank head sound remotely dovish or fail to bring anything new to the table, the Dollar could end up weakening.
Commodity spotlight – Gold
Gold is positioned to be heavily influenced by US-China trade developments and the Dollar’s valuation this week. The metal could trade towards $1300 if risk aversion accelerates the flight to safety. However, a move back below $1280 signals further downside towards $1265.
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