The public comment period on a U.S. proposal for new tariffs on Chinese goods is set to end on Thursday, after which U.S. President Donald Trump can follow through on plans to impose tariffs on $200 billion more of Chinese imports, though it is unclear how quickly that will happen.
Emerging market currencies came in for special punishment as investors feared these export-oriented economies would be caught in the middle of any escalating trade conflict.
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· The selling pressure around the pair is now picking up pace, extending the rejection from last week’s tops in the 1.1730 region.
Deeper pullbacks should meet interim contention at the 21-day SMA at 1.1544 ahead of the more relevant 1.1508.
On the upside, a sustainable surpass of the 1.1745/50 band is needed to allow for a test of 1.1790 ahead of the critical 1.1853 level.
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· The path of least resistance in the USD/JPY appeared to be on the higher side last week, having created a bullish outside-week candle at the key falling trendline.
Accordingly, the pair did rise as high as 111.83 last week, but what bulls needed was a weekly close above 111.49. That would have added credence to the previous week's bullish outside-week candle and confirmed a bull reversal.
However, the bullish close did not materialize, possibly because the anti-risk JPY picked up a bid on the escalating trade war between the US and China and the concerns regarding Italy's fiscal health. Further, strong JPY demand against EM currencies may have fed into USD/JPY as well.
Whatever the reason, the bull reversal remained elusive. At press time, the currency pair is trading at 111.00.
Indeed, the currency pair is trading well above the long-run falling trendline drawn from the August 2015 high and the December 2015 high, however, the rejection at 200-week moving average in July and the failure to close above 111.49last week has neutralized the immediate bullish outlook.
· The latest earnings reports from China's big four banks showed improvements across key financial metrics, but some investors remain worried that things could get worse for lenders in the world's second-largest economy.
Such concerns arose after the country's central bank, the People's Bank of China, made several moves to loosen monetary conditions as economic growth slows and as trade tensions with the U.S. worsen. That made investors fear that Chinese authorities may abandon plans to reduce harmful debt in the economy, which could hurt the banking industry.
· Japanese Prime Minister Shinzo Abe vowed to proceed with next year’s scheduled sales tax hike “by all means” and take steps to ease an expected hit to consumption from the higher levy, the Nikkei newspaper reported on Tuesday.
Abe said his ruling Liberal Democratic Party (LDP) won last year’s lower house election with a pledge to use proceeds from the sales tax increase to make Japan’s social welfare system more sustainable.
· Argentina is getting rid of half of its government ministries and hiking taxes on exports as it grapples with the collapse of its currency.
President Mauricio Macri announced a series of austerity measures on Monday, the day before his government is due to meet officials from the International Monetary Fund. Argentina is trying to speed up the release of cash from a $50billion bailout plan.
· U.S. oil prices rose on Tuesday, breaking past $70 per barrel, after two Gulf of Mexico oil platforms were evacuated in preparation for a hurricane.
U.S. West Texas Intermediate (WTI) crude futures were at $70.25 per barrel at 0650 GMT, up 45 cents, or 0.6 percent from their last settlement.
Anadarko Petroleum Corp said on Monday it had evacuated and shut production at two oil platforms in the northern Gulf of Mexico ahead of the approach of Gordon, which is expected to come ashore as a hurricane.
International Brent crude futures, by contrast, lost ground, trading at $78.09 per barrel, down 6 cents from their last close.
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