Forex analytics. The dollar was in a fever – ForexNews.PRO
Donald Trump is behaving like a moody child. Or an infantile man. He resents the fact that others are offended. The US president has imposed additional tariffs of 100% against China since November 1 for tightening China’s export controls on rare earths. However, before that, the United States had closed loopholes for supplying chips to Asia by tightening its export controls. The markets are neither cold nor hot depending on who is right or wrong. The escalation of the trade conflict allowed the EURUSD to return above 1.16.
After the inauguration of Donald Trump, the markets are facing constant fever chills. The temperature rises and then drops sharply. Investors have moved from American exceptionalism to “sell America,” TACO, or “Trump always backs down,” stock market FOMO while hedging currency risks, and finally to buying the US dollar as the cleanest shirt in the laundry basket. Moreover, the simultaneous growth of the greenback with the S&P 500 reminded of American exceptionalism.
Everything in nature is cyclical, so the return of the “sell America” theme looks logical. Stock indexes sank, and the EURUSD jumped up. At first glance, this is natural given the stabilization of the situation in France. Sebastian Lecarnu became the new and old prime minister there, and the yield spread on local and German bonds returned to the levels that existed before the unexpected resignation of the government.
The problem is that the difficulties with the budget and with the intention of both the left and the right to remove the new prime minister have not disappeared. It is unlikely that the farce of Lecar’s resignation and his subsequent return will change anything dramatically. The trade war is another matter.
According to US administration officials, the United States has more trump cards. China must back down. But he doesn’t want to, he warns of retribution and presents a new weapon – batteries. American companies are increasingly in need of energy storage to maintain data centers. And Beijing can cut off their oxygen supply, as in the case of rare earth minerals.
At the same time, China is effectively redirecting supply chains. In September, its exports grew by 8.3%, faster than Bloomberg experts’ forecast of 6.6%. Shipments to the EU increased by 14%, to Africa – by 56%, to Southeast Asia – by 16%.
While the White House was brandishing the sword of tariffs, China prepared. And this time, the trade war risks dragging on. For investors, it makes sense to focus on cyclical behavior: wait until the “sell America” trade is replaced by TACO.
EURUSD longs formed from 1.1545 and extended from 1.16 should be retained. At least as long as the euro is trading above $1.1585.
