Chart of the Day XAGUSD
USD: Risk sentiment improved further last Friday after both the US and China announced to reach a "historic" phase one trade deal. According to the USTR factsheet, the deal will cover long standing issues in the areas of intellectual property, technology transfer, agriculture, financial services and currency. Meanwhile, the US also said China has committed to increase imports of US goods and services over the next two years by no less than US$200 billion from the annual level in 2017. Although the rollback of existing tariff was smaller than expected – only 15% additional tariff on US$120 billion products which took effect from September will be cut by half to 7.5%, the cancellation of planned additional tariff from 15 December – this was still supportive of global risk sentiment.
What's next? US trade negotiator Lighthizer said on Friday that both sides are aiming to sign a phase one deal in early January in Washington DC. However, the signing ceremony will not involve President Trump and President Xi. “No one is very happy, which means it’s a good compromise, I suppose”. This line probably fit into the phase one deal as well. The phase one trade deal is probably seen as a good compromise, which will buy global markets peaceful time for a few months. However, this is a truce deal rather than a peace deal in our opinion, as discrepancies about rollback of tariff between both sides remain. As mentioned by the US chief trade negotiator, there is no guarantee on additional rollback of tariff although most officials in China including China’s foreign minister Wang Yi believe that the existing tariff will be phased out gradually.
From a technical and trading perspective, XAGUSD has been trading in an extended complex corrective pattern that appears to be replicating the price action witnessed in the spring of 2019, similar to its yellow counterpart. A breach of closing breach 17.50 will encourage a bullish bias targeting a test of the pivotal 18.00 any snap back to reterst the broken trendline from above could provide an additional entry level for bulls, the ultimate upside objective for the bullish thesis is an equidistant swing objective sited towards 22.50. A breach of 16.00 would negate the bullish thesis and suggest a further grind lower.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!