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Yet another round of geopolitical bullying between China and the USA – Market Analysis – July 24

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
Risk-on scenario intensifies as global geopolitical tensions arise

Today's session began again in a mood of higher risk aversion due to the Chinese response to the United States with the closure of the consulate in the Chengdu city. 

This fact has caused Chinese stock markets to experience steep losses with the HongKong50 index losing more than 2% on the day.


This rise in the degree of risk aversion in the market has been transferred to the rest of the global stock markets that have started the day in the red, highlighting the fall of more than 1% of  TECH100 in the futures market, before the opening of the session in the United States. 

As we indicated in previous analyzes, this type of specific event of geopolitical tension will continue over time, causing reactions such as the current ones that at the moment can only be considered as technical corrections within a bull market.

The Japanese Yen

The Japanese Yen is the strongest today, becoming the main safe-haven currency, as has been its traditional behavior. The US Dollar seems to be losing that status as treasury yields plummet with five years at historic lows at 0.26%.

USD/JPY is approaching the central support zone around 106.00, a level below which it would be heading for more significant losses, at least up to the zone of 104.00, from a technical perspective.


European data


PMI economic figures in Europe have beaten all expectations and show a more positive economic recovery scenario than initially expected. 

The statement from the Markit agency, responsible for preparing this economic study, indicates that "Business activity across the Eurozone rose for the first time since February, according to provisional PMI survey data, growing at the sharpest rate for just over two years as economies continued to reopen after lockdowns implemented to prevent the spread of the coronavirus disease 2019 (COVID19) "

Together with the European Commission's stimulus plan, these figures lead market analysts to anticipate higher growth figures in Europe than in the United States for the first time in many years.

This fact substantially increases the interest of financial investors in the single currency. The issuance of a considerable size of European bonds for the first time in its history will attract the attention of significant investment funds and pension funds from all over the world, finding it possible to diversify their risk. 

There is already talk in the market that the Euro can become a new safe-haven asset and, in different research pieces published by several of the leading investment banks, point to a valuation of EUR/USD, as a fair value under current conditions, around 1.2000.

At the moment, EUR/USD is making a consolidation movement, after its latest gains, around 1.1600. From a technical perspective, a weekly close above this level would push it towards higher targets in the 1.1800 zone.


This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.