Daily Commentary
 | 09/08/2018

The U.S China trade war continues with more to come

China’s latest retaliation action included additional tariffs of 25 percent on $16 billion worth of U.S goods. The escalation of the matter seems to be shouting the eye for an eye quote as the new Chinese tariffs will commence on August the 23rd which is the same date the US will start collecting its 25 percent extra tariffs. China revised its list of goods to be subject to tariffs to 333 from 114 in the June draft. Should there be further headlines on tariffs we could see volatility rising on safe havens.

Gold was seen picking up on volatility in the previous days as the metals ability to be used as a safe haven has come into play after further developments in the US Sino trade war. Gold rallied in yesterday’s US session gaining some 4 dollars on an upward movement after it had been lower in the European morning session when it was trading under the 1,210 psychological threshold. Golds upswing could continue today as traders may use it as a hedge instrument for any further economic uncertainty. If the precious metal is undertaken by a bullish movement we could see it move higher aiming for the 1216.37 (R1) resistance level and remain close that price. Technically, the RSI indicator in the 1 hour chart remains near the reading of 50, implying a rather indecisive market. Should traders favor Gold short positions, we could see the shiny metal moving lower breaking the 1210.27 (S1) support level and aim for the 1207.33 (S2) support barrier. Also Gold could remain on a sideways movements between the 1216.37 (R1) resistance line and the 1210.27 (S1) Support level.

China and Germany defend Iran on US dispute

On Wednesday, China and Germany openly expressed their resentment on the harsh stance the US has against Iran. The German government said the U.S. sanctions against Iran violate international law, and the US should consider European interests when coming up with such sanctions. The Chinese foreign minister said China is against the sanctions and that their cooperation with Iran is fair and lawful. Iran officials replied stating they were not worried and that the US will have to face the consequences of its actions.

Saudi Arabia confronts Canada on domestic issue criticism

Saudi Arabia said it will not accept criticism from Canada on arrests of women’s rights activists. Even though the Saudis have taken steps to show their disapproval on the issue the kingdom’s foreign minister, threatened to force new retaliations that could hurt investment flows between the countries, if the matter gets out of hand. According to the Financial Times Saudi Arabia’s central bank and various financial institutions have already started pulling back from investments in Canadian assets. It must be noted that various news sites indicated the Saudis dismissed the Canadian ambassador and suspended any new business deals. The Loonie dropped on the news yesterday exposing its sensitivity to the matter.

USD/CAD stabilized between the 1.30345 (R1) resistance level and the 1.30005 (S1) Support barrier after the drop on the news. Should the bears dictate the pairs’ direction we could see it moving downwards to the 1.30005 (S1) support line and even breaking it moving lower towards the 1.29726 (S2) Support barrier. On the other hand if a bullish movement overtakes the pair we could see it break the 1.30345 (R1) resistance line and aim higher for the 1.30591 (R2) resistance barrier.

In todays other economic highlights:

In the American session we get Canadas Housing Starts Annualized for July and from the US the Initial Jobless Claims and the PPI figures for July.

XAU/USD

• Support: 1210.27 (S1), 1207.33 (S2), 1204.42 (S3)

• Resistance: 1216.37 (R1), 1219.30 (R2), 1222.39 (R3)

USD/CAD

• Support: 1.30005 (S1), 1.29726 (S2), 1.29450 (S3)

• Resistance: 1.30345 (R1), 1.30591 (R2), 1.30906 (R3)