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US Dollar Shrugs Off US-China Trade War Escalation for Now

US Dollar Shrugs Off US-China Trade War Escalation for Now

Nick Cawley, Strategist

USD - Trade War News and Talking Points

- $50 billion of new trade tariffs expected to be announced by the US today.

- The US dollar remains strong despite dispute escalation.

The DailyFX Q2 Trading Forecasts for all major currencies, commodities and indices, are availableto download to help you make more informed trading decisions.

US Dollar Currently Immune to Heightened Trade War Risks

The US administration is set to announce a new round of tariffs focusing on China’s important technology sector according to latest reports, as Washington looks to reduce their trade deficit with Beijing. The list of tariffs is expected to total around $50 billion with their implementation staggered. China has already said that they will retaliate if tariffs are imposed.

The risk of a heightened trade war between the world’s two largest economies has seemingly had little effect on the greenback. The US dollar continues to push higher after the Fed hiked interest rates for a second time this week with the market now expecting an additional two hikes during the course of 2018 and potentially three more during 2019. Short-dated US Treasuries continue to rally pushing the yield on the 2-year UST back towards a multi-year high of 2.60%.

Trade War Primers:

US-China Trade War – A Brief History of Trade Wars From 1900 to Now

The Impact of Tariffs and Trade Wars on the US Economy and the US Dollar

USDJPY Looks to Continue its Latest Rally

The Japanese Yen, normally the beneficiary of any heightened market risk, continues to weaken against the greenback with the May 21 high of 111.40 under pressure. Above here the November 7 high of 114.736 comes into play, especially if the Fibonacci retracement level at 110.877 is broken decisively. Initial support is at 109.866 – 200-day moving average – ahead of the 50% Fibonacci retracement at 109.685.

The latest IG Client Sentiment Indicator shows retail remain balanced on USDJPY but sentiment has changed over the past week.

USDJPY Daily Price Chart (August 2017 – June 15, 2018)

US Dollar Shrugs Off US-China Trade War Escalation for Now

If you are new to foreign exchange, or if you would like to update your knowledge base, download our New to FX Guide and our Traits of Successful Traders to help you on your journey.

What’s your opinion on the USDJPY? Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at Nicholas.cawley@ig.com or via Twitter @nickcawley1

--- Written by Nick Cawley, Analyst

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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