In today’s early Asian session, a report from SCMP (South China Morning Post) has stated that U.S. and China have not make any progress in deputy-level trade talks ahead of today’s key trade negotiation talk between higher ranking officials according to sources.
The first reaction from this negative news flow has triggered a risk off across the board with the S&P 500 E-Mini futures dropped by -1.2% to retest Wed, 09 Oct low of 2888, a drop of 60 pips in the USD/JPY from yesterday, 10 Oct high of 107.63 to print a current Asian session intraday low of 107.01 in line with a drop of 43 pips in the AUD/USD from yesterday high of 0.6750 to today’s Asian session current intraday low of 0.6706. In addition, the USD/CNH (offshore yuan) has pushed up by 46 pips from yesterday low of 7.1214 to today’s Asian session current intraday high of 7.1682.
Thereafter within a span of two hours, Bloomberg has reported that the U.S. administration is looking to roll out a previously agreed currency pact with China that could also see the suspension of the planned tariff increase; 30% from 25% on US$250 billion of Chinese imports to be scheduled on 15 Oct. The currency accord includes terms to ensure China do not engage in competitive devaluation of the yuan, though there are no details out yet. Also, the U.S. administration has considered previously before trade talks broke down that that the currency pact would be a first-phase agreement with China follow by more negotiation talks on intellectual property and forced technology transfers, the sticking points that China do not come to terms with the U.S. in the previous rounds of talks.
Markets have reacted positively to the currency pact news flow where the S&P E-Mini futures, AUD/USD, JPY and CNH have erased all their earlier respective losses. As we head into the high-level U.S-China trade talk today, there will be several “breaking news” headlines that will spurt out in the next 24 hours. Traders need to apply prudent risk management techniques at this juncture and apply technical analysis to decipher the price movement and key levels. Let’s us now look at the USD/CNH.
USD/CNH – In consolidation mode within a longer-term uptrend
click to enlarge charts
Charts are from eSignal
Original from: www.forex.com