U.S – China trade optimism sends the USD/CNY below 7.0000 mark

Global financial markets have taken directions from the U.S China trade war in well over a year. Through a myriad of minor and major complications, it now seems that the two largest economies of the world will soon be signing a phase 1 trade deal.

According to an official statement by China’s Commerce Ministry, the authorities have been successful in proactively dealing with the previously risen trade frictions in 2019. In its annual work conference, the ministry reiterated that a trade deal is soon to be signed with the Trump Administration.

Chinese Commerce Ministry Applauds Trade Representatives For Striking A Deal

It further appreciated the efforts of Chinese trade representatives in extending the central government’s concerns and decisions to the U.S and striking a deal that broadly safeguarded the interests of China and its people.

As per the terms and agreements of the phase one deal, the United States has agreed to minimize a few of the tariffs on Chinese goods while the Asian superpower in return, has pledged to significantly increase its purchase of American agricultural products and a range of other goods.  

While China showed a little reluctance in signing the deal earlier, the latest announcement cleared its stance that no further negotiations are likely and the finalized trade 1 deal is indeed to be signed in the upcoming weeks.

Recent Response In The Forex Market

Following the rising optimism of the trade deal, the U.S dollar was seen losing traction in the forex market. The U.S dollar index dropped as low as 96.54 on Friday breaking two crucial supports at 97.00 and 96.70. The technical analysts have also put a strong sell signal on USD/CNY in the previous week. The pair dropped from 7.0012 on Friday and was last seen trading as low as around 6.9950.

The technical analysts have also commented that the pair will be starting the new year with relatively higher volatility. Amidst the events of the U.S – China trade war, USD/CNY can be expected to remain range-bound between 6.9000 and 7.0000. A daily close above 7.0000 will turn the signal green on the currency in the forex market. On the downside, however, breaking below 6.9000 will open doors for a further drop in the upcoming months.