Global stocks cheer as US and China restart the trade talks
World stocks jumped in the Asian session after the weekend meeting between Donald Trump and Xi Jinping at the G20 summit in Japan. The two leaders agreed to return to the negotiation table and try to hammer a trade deal. The US also allowed US companies to continue supplying goods to Huawei, one of the biggest technology companies in China. In Asia, the Shanghai and Nikkei indices rose by 2.15% and 1.75% respectively. In the US, Dow and S&P futures rose by 0.75% and 0.84% respectively while in Europe, the DAX and Stoxx futures rose by 0.45% and 0.70% respectively.
The Japanese yen weakened against the USD in the Asian session. This weakness happened as the USD rallied following the G20 summit. In Japan, traders received the large and small manufacturing data released by Tankan. The Tankan big manufacturing outlook index in the second quarter declined to 7 from the previous 8. This was better than the expected 6. The large manufacturing outlook index declined to 7 from the previous 12. The large non-manufacturers index rose to 23 from the previous 21.
Later today, investors will receive the unemployment and PMI data from Germany. The German unemployment rate is expected to have remained unchanged at 5.0% in May. The country’s manufacturing PMI is expected to have remained unchanged at 45.4. In the European Union, the consensus estimate is that the manufacturing PMI will remain at 47.8 while in the UK, the PMI is expected to drop from 49.4 to 49.2. Later on, the US ISM manufacturing PMI for June is expected to drop to 51.0 from the previous 52.1.
The EUR/USD pair declined slightly after the deal between US and China. Some investors believe that the deal could help reduce more rate cuts this year. The pair declined to a low of 1.1350, which is slightly above the important support shown below. It was also below the 28-day and 14-day moving averages while the RSI has continued to decline from 68 to the current 38. The pair could continue moving lower to test the 61.8% Fibonacci Retracement level of 1.1323.
The USD/JPY pair rose sharply to a high of 108.50. This was the highest level since June 19. The pair then eased slightly and is now trading at the 108.22 level. On the hourly chart, the pair is below the 28-day and 14-day moving averages. The RSI had previously reached a high of 81 but it later moved slightly lower to the current level of 60. The price is slightly below the upper line of the Bollinger Bands. The pair will likely stay at the current level of 108 as traders think about the impact of the truce between US and China.
The gold price declined sharply today after the truce between US and China. The XAU/USD pair declined to a low of 1340, which was the lowest level since June 25. This drop ended the momentum that has been going on for the past few months, taking it to the six-year high. On the hourly chart, the pair is below the 28-day and 14-day moving averages while the RSI has dropped from the overbought level of 85 to the current 35. The pair will likely continue the upward momentum as the trade deal between US and China brings more certainty to the overall market.