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Trade War uncertainty hurts Stocks – Drives Dollar; Gold – Oil tank; AUDUSD drops back into the .74 handle

Jun 18, 2018 | Market Updates

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Bank Holiday China – All Day

US markets fell on Friday but fought back from session lows. The Dow Jones traded 280 points lower at one point in the session. Investor and trader confidence was hit after the Trump administration said it will impose a 25 percent charge on up to $50 billion in Chinese goods, raising fears of a trade war between the U.S. and China. In a statement Friday, President Donald Trump said the measures would affect Chinese goods “that contain industrially significant technologies,” without specifying those products. The action comes “in light of China’s theft of intellectual property and technology and its other unfair trade practices.”

Trump also said the U.S. would impose more tariffs on Chinese goods if China retaliates with duties of its own on American products. Tensions between the U.S. and several of its key trading partners have been simmering recently as the Trump administration tries to fight trade practices or deals it thinks are unfair to the U.S.

Over the past month, the S&P500 has added 2.5% and the Dow Jones has gained 1.6%.

European markets gave back gains on Friday, Rolls Royce led the gains, up by about 8 percent. Basic Resources stocks fell the furthest, finishing the Friday session over 3 percent lower. Meanwhile, the Banking, and Oil and Gas sectors were both over 1.8 percent lower. The FTSE lost 1.7% the DAX dropped 0.74% and the Euro Stoxx 600 closed 0.8 percent lower.

Oil and Gold had a shocker on Friday, hammered by OPEC supply worries and a surging USD.

OPEC, Russia and other allies look poised to increase output in their meeting in Vienna, Austria on June 22-23. Russian Energy Minister Alexander Novak said his country and Saudi Arabia supported a gradual increase in production after restricting output for 18 months. USOUSD dropped 266 cents falling back to $64. Depending on what comes out of the OPEC meeting this could be an overreaction.

USD strength really took it’s toll on Gold as it was dumped losing $22 in the session. 1300 continues to be the stick in the mud for buyers. Friday saw buyers fail at this point again before sellers unleashed. Trump’s tariff announcement spurred the dollar and set the liquidity transfer off. The weekly uptrend line has now been broken.

The USD was mainly stronger on Friday, the AUDUSD and USDCAD saw strong moves. The AUDUSD lost a further 34 pips closing back in the .74 handle. Sellers testing May’s closing low. The USDCAD jumped on crashing oil prices moving back above 1.32 handle trading at prices not seen since JUN 2017. The Yen had a mild pullback after Thursday’s surge. This morning Yen buyers are back out as uncertainty returns giving safe havens more appeal.

The AUS200 CFD that tracks the ASX200 marched 35 pts higher after gaping lower on open. Shares in Asia are mainly lower this morning. The Nikkei -0.59% lower – The Hang Seng -0.43%. The USDCAD has tested last weeks high but is currently just below at 1.3195. The AUDUSD holding for now at 1.74.5.

Good trading from Eightcap.

Sources; CNBC – All times are AEST

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