Trade War Has Begun

Dear Traders,

Yesterday was the official start of a trade war with the Trump administration announcing a at least $50 billion tariff on Chinese imports. And that decision had a reciprocal effect. Subsequently, China announced plans for tariffs on $3 billion of imports from the U.S., including products from steel to pork.

Investors now fear an escalation in trade tensions between the U.S. and China while an escalation in trade wars could hurt global growth.

The Japanese yen served as a safe haven while the U.S. dollar’s fate is still uncertain amidst an uncertain geopolitical environment.

The British pound’s reaction to the Bank of England announcement was strong but short-lived. The BoE rate decision was a bit more hawkish than expected, increasing the odds for a next rate in May to 72 percent now. The pound soared to a high of 1.4220 but quickly deviated from its highs as market participants took profit at 1.42. We still see the pound trading within an uptrend channel which is why we expect further gains towards 1.4270. As mentioned in yesterday’s analysis, the current support around 1.4070 proved intact from where some buyers have shown up. For the bias to shift from bullish to bearish it would require a sustained break below 1.40.

The euro bounced off the falling trendline and tested the 1.23/1.2280 support area. If the euro climbs back above 1.2370 we expect further gains towards 1.24. A break above 1.2415 would shift the bias in favor of the bulls.

Traders will watch U.S. Durable Goods Orders today at 12:30 UTC.

It has been a very profitable trading week and we therefore advise traders to secure their weekly profit now.

Enjoy the weekend.

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