Market Reaction As Higher Tariffs Kick In

13 May, 2019

The markets were trading mixed by Friday’s close after the tariffs on goods imports from China were hiked from 10% to 25%. This came as the US and China trade talks fell apart.

However, investors are hopeful that there is still a chance for some kind of deal to be reached. Meanwhile, China is expected to retaliate to the hike in tariffs.

Euro Closes With Modest Gains

The single currency managed to post modest gains against the USD. By Friday’s close, the euro was up 0.20%. The gains came as regional economic data saw Germany’s trade balance coming out better than expected. The single currency brushed aside somewhat weaker industrial production figures from Italy and France.

Can the EURUSD Hold on the Gains?

The currency pair closed above the resistance level of 1.1226. At the time of writing, the currency pair is testing this level. If support is established at 1.1226, then the EURUSD could potentially aim to bounce higher. The next main resistance level is seen at 1.1280.

Crude Oil Trades Flat

Oil prices remained muted despite the mounting geopolitical tensions between the United States and Iran. Oil prices closed with small gains of 0.12% on the day on Friday. Investors wait for further geo-political clues including the ground developments in Venezuela and the attempted coup to overthrow the current regime.

Oil is Likely to Maintain the Sideways Range

Crude prices have been trading within the 62.85 and 60.33 levels of resistance and support respectively. This sideways range is expected to continue unless we see a breakout from this level. The bias is to the upside as we expect to see oil prices potentially retesting the 64.55 handle to establish resistance more firmly.

Gold Jumps on Global Cues and Subdued US Data

Besides the ongoing trade tensions, gold prices also managed to rise on the back of muted economic data from the US. The inflation report for April saw headline consumer prices rising 0.3% on the month. Annually, headline inflation rose 2.0% while core CPI eased to 2.1% from the month before. Most of the gains in inflation were due to higher energy prices which rose 2.9% in April.

Gold Prices Settle Back into the Range

Friday’s gains in gold prices did little to keep the price supported. After briefly rising above 1285 handle, gold prices slipped back below this level in early trading today. A continued bearish momentum could push gold prices back to trading within 1285 resistance and 1270 support. Unless we see a daily close above 1285.87, the bias remains flat for the moment. [xau/usd]

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