Last Friday saw a lot of action, making up for the quiet trading week. China announced that it was raising tariffs on $75 billion worth of goods imported from the United States.
This prompted President Trump to hit back strongly, calling for US companies to look for alternatives to China. Trump also raised the tariffs on $250 billion worth of goods from 25% to 30% in response. Equity markets fell as investors rushed to the safe-haven assets.
Euro Rises to a One-Week High
The euro rose to a one-week high, closing at $1.1143 by Friday’s close. The gains came largely due to a weaker USD following new trade spat developments between Washington and Beijing. Economic data from the eurozone was sparse. The uncertainty in regard to Italian politics remains, but the common currency managed to brush aside the regional developments.
EURUSD Tests Resistance, but Can it Break?
The currency pair has been trading flat, for the most part, this year. Once again, the flows from Friday have pushed the EURUSD to the short-term resistance area. If the resistance level at 1.1143 is breached convincingly, we expect to see further gains in store. The bullish divergence on the 4-hour chart time frame adds to this view. The bullish shift comes as the bearish flag pattern is now invalidated following the failure to clear the support at 1.1065.
Pound Sterling Catches a Bid on Weaker USD
The pound sterling managed to post gains, rising for a second consecutive day to a three-week high. The USD was largely responsible for this move. Fed Chair Jerome Powell said that the central bank was prepared to offer more stimulus to the economy if need be. His comments come in the midst of geopolitical events and the trade escalation between the US and China.
Further Upside Likely for GBPUSD
The currency pair has managed to lift-off following the descending wedge pattern formed over the past few weeks. After briefly slipping to test the support area of 1.2208 – 1.2170, cable is now likely to extend further gains. The next main resistance to the upside is at 1.2511 – 1.2533 level. A retest of this level could complete the correction to the upside in the medium term.
Gold Surges on Risk-Off Sentiment
The precious metal rose sharply on Friday and settled at 1526.78 to an ounce. The gains were led by the developments between the US and China. It was just earlier this week that investors were settling following the panic set off due to the inverted yield curve. Following the weekend developments, gold jumped higher on Monday’s open, rising to a new six-year high.
Will XAUUSD Rise Higher?
After posting a new six-year high at 1531, XAUUSD gapped higher this morning to a fresh six-year high. Gold posted intraday gains of 1555.00 at the time of writing. For the moment, the precious metal could pullback off these highs. There is a good chance that gold could ease back to fill the gap at 1526.78. But the bias remains to the upside for the moment.