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Can markets find a silver lining? Hong-Kong heightens Sino-US tensions, boosts dollar

The market mood has markedly worsened amid souring Sino-American relations, with worries about Hong Kong serving as the latest trigger. A mix of developments from central banks, data, and the next moves in lockdowns will determine Friday’s trading.

Titans clash: The US and China have been on a collision course for several days, and the straw that broke the camel’s back was the news that Beijing is considering significantly limiting freedoms in Hong Kong. The US officials have criticized the move and the financial hub city-state is bracing for protests.

US data: A big bulk of US figures published on Thursday was mixed. Weekly unemployment claims came out at 2.483, worse than expected, while Markit’s preliminary Purchasing Managers’ Indexes for May beat estimates. Existing Home Sales plunged to 4.33 million annualized, within expectations.

GBP/USD remains under pressure amid rising expectations for negative interest rates. Retail sales figures for April will likely show a double-digit plunge (see preview) Markit’s PMIs for May showed a recovery from records lows, but Britain remains in deep contraction. The UK is moving to lower its dependency on Chinese exports.

The Bank of Japan announced a new loan scheme for small and medium businesses in a special meeting. Governor Haruhiko Kuroda and his colleagues left the interest rate unchanged at -0.10%. Japan is set to ease restrictions in the Tokyo region if infections continue falling. The country previously loosened the lockdowns in other hotspots.

The European Central Bank’s meeting minutes will shed light on the recent decision, where the Governing Council called on governments to do more and pledged to act if necessary. Any hints about upcoming decisions in the June meeting – another €250 billion of bond-buying is eyed – will shake the euro. Eurozone PMIs mostly beat expectations, albeit remained in depressed levels.

Gold is consolidating its losses after suffering a swift sell-off on Thursday and following hitting new 7.5 year highs early in the week.

Oil prices have ended their winning streak and WTI is trading below $32, adding to pressures on the Canadian dollar. The nation publishes retail sales figures for March later on Friday.

Dollar holds gains as U.S.-China frictions rattle Asian FX

The dollar held gains against major peers on Friday as worries about renewed diplomatic tensions between the United States and China supported safe-haven demand for the greenback.

China-U.S. relations have soured yet again over a broad range of issues, including China’s treatment of the former British colony of Hong Kong and its response to the coronavirus pandemic, which is causing risk aversion to spread.

The fresh geopolitical strains have rattled Asian currencies such as China’s yuan and the Australian and New Zealand dollar.

“There have been problems between the United States and China for quite a while now,” said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.

“Some very short-term players are changing positions from one day to the next, which makes it difficult to see the trend, but overall the dollar looks to be supported.”

According to Trading Central (3rd party RIA) the EURJPY is long positions above 114.83 with targets at 120.95 & 122.60 in extension.

* Past performance is not a guarantee of future performance

Number of Lots:Required Margin:Risk Management (50%):Potential Profit/Loss 120.95
1€ 3,333.33€ 1,666.67€ 2,932.50
5€ 16,666.67€ 33,333.33€ 14,662.50
10€ 33,333.33€ 66,666.67€ 29,325.00
25€ 83,333.33€ 166,666.67€ 73,312.50
50€ 166,666.67€ 333,333.33€ 146,625.00

According to Trading Central (3rd party RIA) the EURUSD short positions below 1.0990 with targets at 1.0725 & 1.0630 in extension.

* Past performance is not a guarantee of future performance

Number of Lots:Required Margin:Risk Management (50%):Potential Profit/Loss 1.0725
1€ 3,333.33€ 1,666.67€ 1,829.80
5€ 16,666.67€ 33,333.33€ 9,149.00
10€ 33,333.33€ 66,666.67€ 18,298.00
25€ 83,333.33€ 166,666.67€ 45,745.00
50€ 166,666.67€ 333,333.33€ 91,490.00

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