$200B of new tariffs may not go into effect
The headline news that Mnuchin would head proposed US/China trade talks, is giving the risk pairs a boost.
AUDUSD.
The AUDUSD moved above a trend line and 100 hour MA earlier (blue line - see post here). That was a bit more bullish. The headline sent the pair up through the 200 hour MA and a topside trend line now. The 38.2% retracement comes in at 0.7198 (from August 20 high). That is the next target.
NZDUSD
For the NZDUSD, it too has move higher on the news. The price high has reached the 200 hour MA at 0.6563 and stalled on the first test. A move above should solicit more momentum with the 38.2% at 0.65866.
USDJPY
The USDJPY bounced higher as well and has bounced toward the levels seen before the weaker than expected PPI earlier today. That comes in at 111.48.
The news is a bit of a concession from the White House and may just be a ploy to delay the $200B of tariffs until after the November election. As mentioned yesterday, $250B in total is not $50B. There are very high risks for both countries (and the world) on a escalation of such a magnitude.
So, what better way to avoid (at least for now) the enaction of the $200B, by extending a olive branch to China for higher level meetings on a bilateral trade deal. That puts the tariffs on hold and gives hope for some progress. It also delays the $200B until potentially after the elections. If there are talks, it will be a slow process for progress.
PS It is also not out the question to use the talks as a manipulative push to the stock market too.
