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Trade war at the door?

June 19, 2020

June 19, 2020

Forex needs shockDmitri Demidenko

Markets would be boring without new subjects

- Why can cats see in the dark?

- They can’t reach the light switch.

![LiteForex: Trade war at the door?][1]

When you can’t figure out what’s going on, you have to move by touch. I don’t feel sorry for Western analysts complaining about the discrepancy between currency rates and economic fundamentals. People are used to basing their behaviour on patterns. When something gets out of the common, they start telling stories about the market’s inadequate movements.  Instead of telling investors  “Don’t follow us, we’re lost too!”.

Authors of books on fundamental analysis are either turning in their graves or pulling their hair out. The US dollar is growing in response to US weak stats, the pound - in response to a higher risk of unsuccessful Brexit, and the Aussie - in response to the global trade’s worse state. Reading books written a few years ago is a silly and even harmful thing to do now. It’s like eating rotten fruit:

- What’s worse than finding a worm in your apple?

-  Finding half a worm in your apple.

![LiteForex: Trade war at the door?][2]

In fact, all is easy. The market is tired of traditional connections, when better macro-statistics are understood as a reason for a rate rise, which in its turn raises demand for corresponding currencies. The market needs some shock linked to new subjects. The subject of the years 2018-2019 was trade wars; the subject of 2020 - coronavirus. It’s the pandemic that makes US stock indexes move. And they make Forex tools move, in their turn.  In March, COVID-19 pushed [S&P 500][3] to its lowest; In April and May, the rumour of a near victory over coronavirus catalysed its 40% rally. In June, the market is afraid of the second wave and Fear prevails over Greed again. What’s more, a trade war can burst out at any time.

I’m sympathetic, intelligent, kind and tender, but not today. Donald Trump criticizes Jerome Powell again and threatens China with a breakup. Washington and Brussels can’t agree upon a digital tax. Everyone has their reasons. Such technological giants as Facebook make enormous profits from quarantined European users and increase the US budget at their expense. On the other hand, Robert Lighthizer is right too, saying that many companies decided to make easy profits by taxing someone else’s companies…the US companies. But it’s the way it’s always been!

In 2018-2019, Chinese media called Trump “a robber” while the US president asserted the contrary: it’s China that had been robbing the US people for decades!

![LiteForex: Trade war at the door?][4]

Still, I hope there will be no trade war and COVID-19 will be brought under control, if it doesn’t disappear by itself as Trump has promised. Trump could permit himself to show off two years ago, saying the US didn’t particularly need a trade agreement with China. But the presidential election is approaching, and a strong [S&P 500][3] is Trump’s trump.  As for Beijing… If you don’t want it, you won’t get it.

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” :)

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

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Price chart of SPX in real time mode

![Forex needs shock][7]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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