Increase in risk aversion at the beginning of the week

20.05.2019 05:28|Conotoxia Ltd Analyst Team

The escalation of the US and Chinese trade wars is again hitting the markets. Mainly in US stock indices, including Nasdaq 100 and in currencies: Swiss franc or Japanese yen. This time it`s about cooperation on the Google and Huawei.

On Thursday, the US Department of Commerce signed Huawei Technologies and dozens of other related companies on the so-called black list. Corporations that are on it must have the US government's consent to buy technology or components from US companies. As a result, the American giant Google (basically Alphabet, owner of Google) has suspended cooperation with the Chinese company. Business activities that have been suspended relate mainly to software and hardware.

Therefore, the entire supply chain is endangered, which is disadvantageous for all Chinese and American companies, because the lack of orders from China means no sales from the US, and we are talking about one of the key players on the mobile market. What's more, chip manufacturers, including Intel Corp., Qualcomm Inc., Xilinx Inc. and Broadcom Inc., they said they would not deliver their components to the Huawei group until further notice - people who were familiar with the case said. Therefore, we can observe significant declines on the US trading floor at the beginning of the week. Nasdaq 100 was down almost 2 percent.

In addition, due to the worse global sentiment and another step in the trade conflict, the Japanese yen and the Swiss franc strengthened. Looking on the USD/JPY chart, there could be a chance to return to the lower limit in the trend channel or even to break the line drawn through the recent lows. The current structure may be recognized as a flag pattern which is usually a trend continuation structure.

Wykres USD/JPY

Chart: USD/JPY, H4. Conotoxia trading platform.

 

Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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