Biden Vows To Continue Tough Stance on China
Following Trump’s exit from the US Oval Office, it’s fair to say that US/China relations have been largely removed from the spotlight. While this is mostly a relief for those of you reading about it on a daily basis, not to mention those of us covering the issue, the situation is still fragile and certainly worth keeping an eye on from a trading perspective.
From the off, Biden was keen to make clear to China that he would be no push over and has made clear his aims to pursue China over its human rights abuses as well as other issues such as its militarisation of the South China Seas and trading stand-off with Australia. China in typical fashion has warned the US not to interfere in its business with vague threats of repercussions if it does so. For the most part, however, both economies have pledged to working together to forge a harmonious future and avoid any hostilities. Still, developments within this so-called effort suggest the risk that any relationships is tenuous at best and vulnerable to collapse.
Beijing Blocks US Calls
Just this week, attempts at opening a line of communication were squashed following an error from the US side. The US defence secretary Lloyd Austin called Beijing but accidentally requested to speak to the central military commission chairman instead of the defence minister and had his call blocked. This comes on the back of the Beijing reportedly turning down three requests for communication from the US defence secretary. While seemingly insignificant, these events show how tensions continue to boil just below the surface and reflect a far from amicable, diplomatic relationship.
Tech Sector Disputes
One of the key flashpoints between the two nations is technology. The US is fighting to retain its position as the world leader in technology while China is fighting to usurp it whist also becoming completely self-reliant in the tech space. It is likely within this are that the highest risk of confrontation can be found. In the near term, CNY is benefitting from the better risk appetite seen globally and the weaker US Dollar. However, if US inflation expectations start to ratchet significantly higher again, putting the emphasis back on Fed tapering, this could cause a reversal in this dynamic.
Technical Views
USDCNH
For now, USDCNH continues to trade lower within the narrow bearish channel which has framed the reversal from the 6.5805 level. Price is now breaking below the 6.4018 level which, if sustained, will put the focus on a test of the 6.3246 level next. However, with the RSI and MACD both showing bullish divergence, there are reversal risks if price breaks back above the channel top, putting 6.4964 back in view.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.