US-China Trade Deal Nears. Dow Jones Index To Surge Higher?

  • master
  • 22.02.2019
  • Comments Off on US-China Trade Deal Nears. Dow Jones Index To Surge Higher?
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In 2018, Washington ignited a trade war with Beijing that helped fuel the most amount of stock market volatility since the financial recession. A breakthrough was made in December, when both parties agreed to halt new tariffs for a period of ninety days. That ends on March 1, 2019.
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<a href=”https://admiralmarkets.com/analytics/traders-blog/us-china-trade-deal-dow-jones”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/f46f15209f2110d6af191fd149b9b87f.png” style=”” alt=”How will the US-China deal impact markets?” rel=””></a>
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Traders are on high alert as we edge closer to this all-important date. But, just how close is a US-China trade deal, and how will the US stock market’s Dow Jones Index, or DJI30 Index, react? Let’s take a look at the situation.
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<h2>US-China Trade War Background</h2>
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Since the US launched an investigation into Chinese trade practices in 2017, they have placed three rounds of tariffs on Chinese goods totaling more than $250 billion. China has since retaliated in kind with tariffs on over $110 billion worth of US goods.
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Fears of further escalation were felt by stock market investors which helped fuel the 2018 global stock market decline. However, since both countries agreed to put any new tariffs on hold until March 1, 2019, stock markets have since roared back to the upside.
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<h2>Is a US-China Trade Deal Near?</h2>
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Talks between Washington and China are ongoing and will most likely go to down to the wire. However, recent
<a href=”https://www.bbc.co.uk/news/business-47221352″ target=”_blank”>comments</a> from US president Donald Trump suggests he is open to extending the deadline for a deal with China – but only if they make good progress.
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This helped lift stock markets even further – as Trump previously threatened another round of tariffs of $267 billion if no deal was made by the deadline. With buyers firmly in control, just how far can they take it and are there any obstacles in the way of further upside? Let’s have a look at the Dow Jones 30 Index, or
<a href=”https://admiralmarkets.com/start-trading/contract-specifications/instrument/dji30″>DJI30 Index CFD</a>.
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<h2>Trading the DJI30 Index CFD</h2>
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<a href=”https://admiralmarkets.com/analytics/traders-blog/us-china-trade-deal-dow-jones”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/88a222bb33f9b5c396605a220b0ca545.png” style=”” rel=”” alt=”Down Jones Index 8-year graph”></a>
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<em>Source: Admiral Markets </em><a href=”https://admiralmarkets.com/trading-platforms/metatrader-se”><em>MT5 Supreme Edition</em></a><em>, DJI30, Weekly – Data range: from June 12, 2011, to February 20, 2019, accessed on February 20, 2019, at 7:40 am GMT. – Please note: Past performance is not a reliable indicator of future results. </em>
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In the above chart, it’s clear to see the recent volatility of 2018. However, since the beginning of this year, the stock index has roared back on hopes of a US-China trade deal. The key question on everyone’s mind is whether or not the index can get back to test its two previous all-time highs at the $26,703 price level, as shown by the black horizontal line. Let’s zoom in to the daily chart for a closer look:
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<a href=”https://admiralmarkets.com/analytics/traders-blog/us-china-trade-deal-dow-jones”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/671fc71cfa13d8683d05d049041e5a4d.png” style=”” rel=”” alt=”Dow Jones Index daily chart”></a>
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<em>Source: Admiral Markets MT5 Supreme Edition, DJI30, Daily – Data range: from May 14, 2018, to February 20, 2019, accessed on February 20, 2019, at 7:46 am GMT. – Please note: Past performance is not a reliable indicator of future results. </em>
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In this DJI30 Index CFD daily chart, it is evident that buyers still remain in control. In fact, they have kept the price above the ten period
<a href=”https://admiralmarkets.com/education/articles/forex-indicators/exponential-moving-average”>moving average</a>, as shown by the blue line. As long as the market can stay above this level, traders will be looking to hold their buy positions, or long positions, until it reaches an all time high. An official announcement of a trade deal could help accelerate the move to higher highs.
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However, markets rarely move in a straight line. In its recent upwards run, the DJI30 Index CFD has shown a series of up and down cycles – with several bounces off the ten period moving average. Traders will undoubtedly be paying close attention to this area for the possibility of initiating new long positions. Will you?
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<h2>Conclusion </h2>
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While the market is optimistic about a trade deal, there is still the possibility of no-deal being announced. In this case, sellers could take control of the DJI30 Index CFD. Many beginner traders will be worrying about which direction they should trade in, while also fearing the possibility of taking a losing trade.
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Of course, this is a natural human instinct. But remember, a trader’s job is to manage probabilities and risk – in the face of uncertainty. Having a plan on how you trade can be very useful in these situations. More importantly, the use of advanced
<a href=”https://admiralmarkets.com/products/volatility-protection”>volatility protection</a> settings could be one of the most important tools you use when trading the high possibility of upcoming volatility in the DJI30 Index CFD.
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<a href=”https://admiralmarkets.com/analytics/traders-blog/us-china-trade-deal-dow-jones”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/a7c07b6d71bd00b095c7cf03b8925dd7.png” style=”” rel=”” alt=”Download MetaTrader 5 and begin trading today!”></a>
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<p>
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