Trade Wars Latest: Concerns About NAFTA, China Dominate USD

USD PRICE, NEWS AND ANALYSIS:

• The trade dispute between the US and China is weakening confidence in the US Dollar.
• Detail of the NAFTA deal between the US and Mexico are scant, and trade relations between the US and Canada are poor.

Our trading forecasts for Q3 have been published; you can find the USD and EUR guides here.

And check out the IG Client Sentiment data to help you trade profitably.

TRADE TENSIONS MAY WEAKEN USD SENTIMENT

Concerns about the trade wars between the US on one side and Mexico, Canada and China on the other have eased a little but will likely remerge soon to keep the USD on a downward track.

There are three principal concerns:

• Details have not yet emerged about the trade deal between the US and Mexico. Anyway, it could be stalled by Congress and an actual agreement could still be months away,
• Canada has rejoined the three-nation North American Free Trade Agreement (NAFTA) talks but little progress has been made so far, and
• A deadline for the next round of US-China tariff talks next week is fast approaching.

For now, EURUSD is off its highs, with USD helped by optimism following the news of the US-Mexico deal. However, reemerging doubts could well bolster the pair and send it higher still.

EURUSD PRICE CHART, DAILY TIMEFRAME (MAY 22 – AUGUST 29, 2018)

Chart by IG

News that the US trade deficit in goods widened to $72.2 billion in July will likely strengthen the determination of US President Donald Trump to take a hard line in the negotiations with its trading partners – and that will likely ensure that the EURUSD uptrend resumes soon.

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