Markets Rattled as China Hits Back with Tariffs

The Beijing administration hit back by announcing tariff hikes on roughly $60 billion worth of goods imports from the United States. In response to the U.S. tariff hikes following the breakdown in trade talks, China has raised the tariffs from 5%-10% to 25%. This will be effective from June 1^st.

The news sent the equity markets plunging as investors sought the safety of safe haven assets. The US said that it would raise the tariffs on the remaining $325 billion worth of imports from China.

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Euro Muted, Waits for Industrial Production Data

The common currency was muted to the trade war tensions as it fell 0.08% on the day. Lack of fundamentals kept the euro currency confined to its recent range. The economic docket today will see the release of the final inflation figures for Germany and the ZEW economic sentiment index. This is later followed by the Eurozone’s industrial production data.

Will the Euro Breakout from its Range?

Price tested the upper end of the range at 1.1250 but after a brief attempt, settled back lower. In the process, EURUSD has been posting a modest uptrend. The minor trend line will be critical as a break down will see price retreating and potentially testing the lows again at 1.1140. We do not expect to see the common currency breakout from this range at this point.

Oil Declines 1.2% on Slowing Growth Concerns

WTI Crude oil prices plummeted 1.2% on the day after price briefly tested intraday highs of $62.85. The declines came on worries that the escalating trade wars could potentially hit global growth. Meanwhile, news reports about two Saudi oil tankers being sabotaged led to a brief rebound in price earlier in the day.

WTI Crude Oil Could Remain Flat

Despite the intraday bounce, the short term outlook for oil prices remain flat. Trading within the established range of 62.85 and 60.33, we do not see this range being breached. The bias remains to the downside for the moment as oil prices could establish the support at 60.33 more firmly. Failure to retrace back to 64.65 could see price starting to build the upside momentum if the lower end of the range holds the declines.

Gold Surges on Risk-off Sentiment

The precious metal surged over 1% on Monday. The gains came during the early NY trading session after reports about China raising tariffs on US goods made news. Gold touched intraday highs of 1300 before retreating slightly. The precious metal has been trading choppy, tracking the global cues.

Will Gold Maintain the Upside Bias?

After the breakout from the 1285 resistance level, gold prices quickly advanced to test the 1300 price point. However, the daily chart continues to point to the divergence which could see price stabilizing in the near term. A retest of the 1285 level could see this price level turning to support. If gold holds this level, we expect to see a gradual shift to the upside.