DOLLAR FALLS AND STOCKS REBOUND AS FEAR OF TRADE WAR SUBSIDES
Last week, the United States imposed fresh tariffs on Chinese imports amounting to more than $60 billion. In response, the Chinese government, imposed tariffs on American imports worth about $3 billion. During the weekend, it was reported that the commerce ministry of the two countries were holding talks to resolve the issues. Of key importance is the reduction of the American deficit with China and the protection of American technology in China. Today, while the markets have traded higher, the dollar has been under pressure, with the dollar index shedding almost 0.50%. On the other hand, stocks jumped with the Dow soaring by almost 500 points.
Gold prices continued the upward movement started a week ago to trade at $1351. This is a significant gain from last week when the XAU/USD pair traded at the $1300 level. The gain came as the dollar weakened following trade tensions started yesterday. Meanwhile, the Wall Street Journal wrote a piece comparing gold’s price movements with that of its poor cousin, silver. According to the article, gold is currently trading at an 82% premium over silver which is a slight indicator of the levels of global risks. Remember, while gold is primarily used as a store of value, silver has more industrial uses.
After reaching a multiweek low of 1.2238 last week, the EUR/USD pair advanced as it tried to approach the important level of 1.2444. The surge on the pair came as traders seemed to adjust to the new political and trade issues coming from Washington. Apart from trade issues, the talk is that the president could be sued about a settlement to a porn star years ago which could increase pressure on an embattled president.
Dow Jones Industrial Average (US30)
After experiencing a major loss last week, the US30 opened higher today following reports that the US was having talks with China. Previously, the US ended the tariffs on steel and aluminum on South Korea, the third largest exporter. The country agreed to open up its auto market to US-based companies. The index is currently trading at $24,000 and it could go higher as traders understand the Trump formula to deal making.
Gold continued its ascent boosted by a weaker dollar. Today, gold climbed by more than 0.20% while the dollar index declined by more than 0.40%. Apart from the fears of a trade war, the dollar’s decline could also be attributed to the successful launch of Yuan-backed oil futures at the Shanghai Stocks Exchange. Nonetheless, a slight decline to the price of gold could come as traders take profit. As shown below, the RSI is currently above the overbought level.