The U.S. stock market and the U.S. dollar regained confidence after President Donald Trump announced that he was aiming for a quick victory at an important meeting next Thursday with his Chinese counterpart, Xi Jinping — even if the outcome falls short of a comprehensive agreement.
Ahead of the meeting, the U.S. president said he wants to extend the pause on tariff increases on Chinese goods in exchange for Xi resuming purchases of American soybeans, taking measures against fentanyl, and lifting restrictions on rare earth metal exports — while maintaining certain trade barriers that he considers necessary.
"I think we'll make a deal on everything," Trump told reporters.
This statement, which appeared to be an attempt to set the tone for the upcoming negotiations, drew mixed reactions. On one hand, the proposal to resume U.S. soybean supplies looks like a concession meant to ease the negative effects of the trade war on American farmers. On the other hand, the demands to take action against fentanyl and to lift restrictions on rare earth metal exports raise issues that go beyond trade — touching on national security and public health.
The issue of rare earth metals is particularly sensitive, as they are used in the production of electronics, batteries, and other high-tech devices. China's control over this market gives it a significant advantage, and lifting the restrictions could weaken Beijing's position.
Trump also proposed a hard-to-achieve nuclear weapons agreement and expressed a desire to persuade Xi to put pressure on Russian President Vladimir Putin.
However, Trump's pursuit of deals often prioritizes style over substance, and experts expect that any agreement reached at the upcoming summit in South Korea will likely serve to ease tensions following weeks of escalating threats, retaliatory trade measures, and harsh rhetoric — rather than result in a comprehensive accord that resolves the underlying conflicts.
It is clear that both sides are seeking stability in their relations, but the question of on what terms that stability will be achieved remains open. Trump's eagerness to secure a result he can present as a victory creates the risk that he might concede to some of China's key demands — including access to advanced semiconductors and the status of the self-governing island of Taiwan. The president, in particular, has not ruled out such compromises. Nonetheless, it is unlikely that the U.S. leader will make significant concessions on these points, given the national security concerns and domestic political challenges involved. This reduces the likelihood of a large-scale deal that would assure markets that a trade war will be avoided. It is worth noting that the current tariff agreement between the two countries expires in November.
Many experts agree that, despite the negative consequences, the trade confrontation is testing both countries' resilience to economic challenges. The tariffs have driven up prices for American consumer goods and limited China's access to its largest export market.
At the foreign exchange market, things remain calm for now — but that calm will likely last only until the release of the much-anticipated U.S. inflation data.
Current Technical Outlook for EUR/USD
At present, buyers need to break above the 1.1620 level. Only this would allow them to target a test of 1.1650. From there, the pair could rise to 1.1700, although achieving this without support from major players would be quite difficult. The furthest target stands at 1.1725. In case of a decline, I expect significant buyer activity only around 1.1590. If no one steps in there, it would be preferable to wait for a renewal of the 1.1545 low or to open long positions from 1.1500.
Current Technical Outlook for GBP/USD
Pound buyers need to break above the nearest resistance at 1.3350. Only then can they target 1.3385, which will be quite difficult to overcome. The furthest target is the 1.3420 level. In case of a decline, bears will attempt to regain control over 1.3315. If they succeed, a breakout of this range will deliver a serious blow to bullish positions and push GBP/USD down to the 1.3280 low, with prospects of extending toward 1.3250.
