The financial world froze in anticipation of "military action" on the front of the trade war between the US and China. At 00:00 hours, the US will impose 25 percent duty on imported goods from China for a total of $ 50 billion. Beijing can apply retaliatory measures on the original amount of 34 billion dollars.
Despite the fact that the countries will exchange "blows" exactly at midnight from July 5 to 6, China can outrun its rival. Beijing time is 12 hours ahead of Washington, and, according to preliminary information, China will enforce tariffs according to its time zone. This means that a full-fledged trade war will begin in just a few hours. This fact makes the traders (and not only the currency market) nervous, despite the long preparation for this event.
The nervousness of the market is reflected in the dollar index. The indicator dropped to the base of the 94th figure, and it seems that in the near future, it will test the 93rd level. The other instruments behave in different directions. The euro and the pound are growing, the franc is marking the spot, and the yen is weakening, despite the fact that the northern movement of USD / JPY is not pronounced. Gold also can not decide on the vector of its movement. Contradictory rumors, on the one hand, frighten off buyers, but also do not attract sellers. As a result, XAU / USD is already trading in the flat for the second day, demonstrating impulse price "fuss".
Information about the prospects of the trade war does come in contradictory. Obviously, Trump is ready for a long confrontation and, most likely, will play on the rise. For every step he takes, Beijing will increase the "cost" of the tariff policy. According to experts, further Trump will impose duties on 200 billion dollars and after some interval of time, for another 200 billion.
China's response strategy is a subject of wide discussion. Some are confident that Xi Jinping will consistently and symmetrically respond to American actions, devaluing the yuan. Others believe that the Chinese will go on the offensive, in particular, reducing the amount of investment in the US national debt. How can I not remember the recent rumors about this, which "accidentally" surfaced in the American press. Considering the moment when this information appeared on the market, such a scenario can not be ruled out.
However, among the currency strategists, there are supporters of the version of the "beautiful surrender." In their opinion, behind the external screen of the initial economic "blows" will follow the negotiation process, during which the Chinese will nevertheless make concessions to Washington. As an argument of this version, analysts cite the latest official Chinese data on the level of exports. The structure of this indicator for the first half of the year indicates a slowdown in the export sector, which may indirectly indicate that Beijing still took a course to reduce the surplus of foreign trade with the United States. In addition, supporters of the "peaceful" version point to the statement of the representative of the People's Bank of China, who assured the world community that the regulator does not use the exchange value of the national currency in the trade war. This speech stopped the fall of the yuan, but, for a short while, today the USD / CNY rate jumped to 6.717 (maximum since August 2017), then rolled back to day lows.
It is worth noting that all of the above versions have the right to life, and numerous experts give their arguments in favor of this or that scenario. Such uncertainty reigns in the foreign exchange market too. Traders can not decide whether to flee from risks or remain patient. Gold in this context reflects the general picture, impulsively bargaining in a narrow price corridor.
Macroeconomic indicators today have receded into the background. For example, the ADP report, which came out below forecasts, was virtually ignored by the market. The minutes of the Fed's June meeting, published today for the final of the US session, could affect the overall fundamental background, especially if regulators focus on the protectionism of Donald Trump. In general, the market is already set for a four-fold rate increase this year, so any hints of this fact are unlikely to cause a "storm of emotions." But if the regulator members are concerned about foreign trade policy, the dollar may be under strong pressure, and gold, respectively, in the win.
Summing up, I will say that the financial world is on the threshold of important events, and on the eve of such eventual thresholds, the market often does not know where to lead the price of one or another instrument. Gold is currently in the trap of uncertainty. Traders are not sure that defensive assets will be in demand in the coming days. Technically, XAU / USD can continue the corrective growth to the first resistance level of 1272 (the middle Bollinger Bands line, coinciding with the Kijun-sen line on the daily chart). The level of support is still the price minimum of the year, the level of 1237.
