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FTSE called higher amid strong Chinese trade data

Chinese imports and exports increased by 21.5% and 12.9% respectively, well ahead of consensus estimates of 16% and 8%.

The trade figures are usually significant because they give an indications of how mineral-hungry China is, and in turn can have a major impact on the price of mining companies.

The announcement is also be important as it highlights the trading imbalance between the US and China. The US has sent trade delegates to China, and they are seeking to develop a new trading relationship, one that tilts the balance back in the favour of the US. Putting ‘America first’ is one of President Trump’s main aims, and reducing the trade deficit is certainly of one the goals. Global equity markets have been fairly stable recently and the lack of negative news in relation to the possible global trade war is a major factor, so dealers will be paying close attention to developments between the US and China.  

Oil prices pulled back a little after reaching a fresh 42-month high. Traders are concerned about supply as President Trump will make his decision regarding the reintroduction of sanctions on Iran today at 7pm (UK time). Iran is one of the largest oil suppliers in the world, and the fear surrounding the possibility of the US withdrawing from the Iranian deal is fuelling the buying.

The US dollar index reached a new high for 2018 yesterday, and the move was partially helped by the dip in the euro Yesterday, Germany posted a 0.9% dip in factory orders, while economists were expecting an increase of 0.5%. Mario Draghi, the president of the European Central Bank, recently warned the region is losing economic momentum, and it has been weighing on the euro ever since.

The greenback is holding up well considering Friday's mediocre non-farm payrolls report. The lower-than-expected headline number is a relatively small issue because the jobs market is strong. But the fact average earnings missed expectations, and there was a negative revision to the March figures too, suggest the wages component is still lagging. The Federal Reserve is likely to hike interest rates in June, but the possibility of two more rate hikes beyond that this year seems less likely.

Forex snapshot

EUR/USD – has lost a lot of ground since the middle of April. A break below 1.1900 could put 1.1800 on the radar. A move back above the 200-day moving average at 1.2016, could pave the way for 1.2138 to be retested.

GBP/USD – is hovering around the 200-day moving average at 1.3530. If that level can be held, we might see a bounce back at 1.3712, and beyond that bulls might look to 1.3800. A break below 1.3530 could send it to 1.3300.

EUR/GBP – has been staging a comeback since mid-April, and the 200-day moving average at 0.8879 might act as resistance. Support might come into play at 0.8782 – the 50-day moving average.

USD/JPY – while it remains below the 200-day moving average at 110.19, its outlook is likely to remain negative. Support might come into play at 108.00. A break above 110.19 could bring 111.48 into play.

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