The US-China trade war saga continues

Wednesday, 8th May 2019 09:40 - by Rajan Dhall

Within the last few minutes, Chinese sources have revealed that China 'miscalculated the resolve of the Trump administration'. Further to that apparently, China sort changes to its text on intellectual property and technology transfer. 

So it appears that Trump may have the upper hand in this political poker game. So it has been said that the Chinese will backtrack on the legal issues throughout the text of the proposed trade agreement and this is said to affect nearly every chapter of the document (according to sources).

Although there was not a massive reaction in the indices straight away there could be implications moving forward. If these reports are confirmed then we could see another move back up after the retracement seen over the last few days since Trump's infamous tweets which insinuated that more tariffs could be added as soon as this Friday. Tomorrow and the day after Chinese high-level officials are said to be in the US to complete negotiations and report back to Premier Li, so if you are in any of the large caps keep a close eye on developments as we could be in for a rocky ride. 

So on the technical side, it would be wise to look for support levels and the 7200 level seems to have all the hallmarks of a good one. It was used as support in September'18 and then once broken was a formidable resistance over 3 separate occasions. The more a level is used as support and resistance the more it is remembered so around this mark I will be keeping an eye on global risk sentiment in equities. Downtrends often retrace like this but the fundamental drivers are the catalyst for the trend returning. Although we have broken the trendline on the daily chart below they are also often retested to confirm the break so this could be another reason for a move back to around 7400. As with anything when Trump wakes up and takes to twitter it leaves us with an assortment of unknown variables so as with any prediction or forecast wait for confirmation and control your risk.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.