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Washington Urges Demilitarisation of South China Sea During US / China Talks

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During high-level talks between Chinese and US officials in Washington last week, it was freedom of navigation that stole the limelight as trade disputes were relegated.

Washington urged Beijing to cease its militarisation of the disputed the South China Sea, though Beijing dismissed the US plea and instead admonished America for sending its warships close to islands which China claims as its own.

China Defends Its Rights

The US Secretary of state told reporters “We have continued concerns about China’s activities and militarization in the South China Sea.” Meanwhile, China reportedly responded by saying that it had the right to develop “necessary defense facilities” in what it considers to be its own territory.

The talks, held in Washington, come ahead of a keenly anticipated G20 Summit to be held in Argentina later this month which will host a meeting between President Trump and Chinese Premier Xi Jinping.

Among the topics being discussed were issues such as the ongoing trade dispute between the two economic superpowers, freedom of navigation in Asia-Pacific waters, the sovereignty of Taiwan and also China’s targeting of the Muslim minority in Xinjiang.

Chinese Officials Warn Against Negative Effects Of Trade War

The visiting Chinese officials warned against the damaging effects of the trade war which they feel will result in harm for both economies and called for communication channels to be kept open for the issue to be solved.

Tensions between the US and China had escalated over the last six weeks or so until news recently that Trump is now in talks with China regarding a potential trade deal. Trump has been using his Twitter account to publicize his optimism around such a deal, and the market reaction so far has been one of clear relief with equity markets rallying strongly in response to such reports.

Technical Perspective

S&P

Last week’s rally in the S&P saw price trading back up to test the 2803.18 level resistance (March 2018 high) which has held for now. If price can make it above that level, focus will turn to the 2879.02 level resistance which was the initial 2018 high, and above that, the current 2018 high at 2940.03. To the downside, the next key level is the recent swing low of 2604.44

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