Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Yen to strengthen on haven search

The escalation of US-China tension continues with the latest currency manipulation accusation, suggesting the light at the end of the tunnel is yet to be seen. Consequently, haven trades may still have room to advance.

Further US-China trade escalations ahead?

The biggest question following the near 3.0% decline for the S&P 500 index this week had perhaps been of little doubt as to how much longer this escalation of trade tensions could continue to weigh on market sentiment. While it is a question that perhaps nobody, including the negotiators themselves, have an answer to, the likelihood for things to get worse before it gets better remains the case going into the Tuesday session.

Looking at the sudden turn of events, President Donald Trump had picked up the fight with the fresh tariffs threat despite the agreement of a truce at the G20. This had been based on China choosing to ‘re-negotiate the deal prior to signing’, in addition to the lack of agricultural purchases from the US, according to his tweets. For the Chinese leaders away at their retreat receiving this sudden news, the reaction so far had certainly been aligned with their commitment to ‘necessary countermeasures’. The perceived retaliation in allowing the yuan to weaken against the greenback had perhaps been one of the most targeted options in countering the impact of an increase in tariffs amongst their limited choices. In setting a further weakest yuan mid-point since May 2008 at 6.9683, the Chinese authorities had perhaps signalled their resolution at this point of time.

Policy support still expected

Despite the extended declines across US and Asia equity markets, the silver lining here is perhaps the expectation for continued policy support. This ranges both fiscal and monetary support from the PBOC and further rate cut hopes for the Fed that could help to cushion some of the fall. This, unfortunately, may also be a double-edged sword in potentially emboldening both the US and Chinese administration to carry with on this trade war, altogether still amounting to the bearish bias to hold within for the equity market in the near term.

Eye USD/JPY downsides towards 2018 lows

Consequently, for the likes of the safe haven trades, despite the oversold situation for USD/JPY and vice versa for gold prices, these may remain the shelters to be in the near-term until the situation reverses. Once again, the potential for USD/JPY on the downside extends towards the 2018 lows of around $104.65, one to watch.

On the flipside, a return back above the $107.43 support-turned-resistance would mark a dissipation of this strong risk aversion sentiment though that may not be the short-term expectation in light of the abovementioned factors.

Source: IG Charts

Yesterday: S&P 500 -2.98%; DJIA -2.90%; DAX -1.80%; FTSE -2.47%

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Seize your opportunity

Deal on the world’s stock indices today.

  • Trade on rising or falling markets
  • Get one-point spreads on the FTSE 100
  • Unrivalled 24-hour pricing

See opportunity on an index?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on an index?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Get spreads from one point on the FTSE 100
  • Trade more 24-hour indices than any other provider
  • Analyse and deal seamlessly on smart, fast charts

See opportunity on an index?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.