Cracks Appear in Trade Deal

11/11/2019 9:12 am EST

Focus: FOREX

Ashraf Laidi

Founder, Intermarket Strategy Ltd. and www.ashraflaidi.com

Lack of confirmation of a U.S.-China “Phase One” trade cause U.S. stock indexes to retreat from highs, reports Ashraf Laidi.

The US-China trade deal may be pushed back with sides struggling to agree on a location, and more likely on the contents of an agreement. On Friday, U.S. stock indexes moved further away from their highs after President Trump told reporters the Administration has not agreed to roll back tariffs on China (see tweet below). 

Cracks Appear in Trade Deal - Tweet Navarro (Chart 1)

US-Chinese disagreements about the location of signing the trade deal appear to be the least of traders' concerns at this point.

Those Market Levels

Fundamentals apart, the spot gold vs. the U.S. Dollar (XAUUSD) broke below the 1480 horizontal base, now attempting to a hold above 1455, the previous resistance extension. A break below it, risks dragging it to 1429. U.S. 10-year Treasury note yields broke the two-month trend line resistance, paving the way for a required breach of 1.95% for the three-month uptrend to remain intact.

Similarly, the Japanese yen (USDJPY) faces trendline resistance at 110.10, but only after a confirmed close above 109.55.

The yield curve is further steepening after a brief inversion, which helps explain the record highs in U.S stock indices. The Federal Reserve is trying to stay out of the conversation, leaving the US-China trade talks approach a positive compromise. Said differently, the Fed aims at returning to a phase where it makes minor changes to its assessment and no changes in rates. Such would be the ideal scenario for stocks. The only issue is whether the world and U.S. economies manage to shake off their pockets of weakness, and if stocks avoid another round of Cboe Volatility Index (VIX) indigestion. Watch the sectors and their technicals--The leaders vs the laggards --the defensives vs cyclicals.

In other news, the U.S. dollar ended last week higher against all currencies as gold and silver were pummeled relative to copper in a sign of growing optimism.

You can see Ashraf’s daily analysis at www.AshrafLaidi.com and sign up for the Premium Insights.

Ashraf Laidi recently talked about the Dollar, gold and the Chinese yuan Triangularity at TradersEXPO New York.

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