09:10, 15 May

Recovers from Three Month Low Below 25300 as Trade War Escalates

In the last couple of weeks the US30 index has eased lower and fallen sharply in the last 48 hours back to a three month low below 23500, before rallying a little in the last 24 hours back up above 25500. Prior to this decline, the index had done well in the last few weeks to steadily move higher and finally push through the resistance at the key 26000 level and move to a six month high above 26600. 
It had been receiving some support from the 26000 level however this has now given way and may provide some resistance to prices rallying higher.

Throughout February and March the US30 index seemed to have been content to trade in a narrow range roughly between 25400 and 26200, before the recent break. In early February the index consolidated in a narrow range right above the significant level of 25,000 before it began its slow climb higher. It was able to resume what has become a very steady climb higher which started back in December.

At the end of January, the 25000 level offered some resistance to the index however this was quickly broken through, only for the level to prop up the index since, and this level remains key. December was several weeks the US30 index would rather forget as it fell very sharply down through any support at the 25,000 level and then also through the 24,000 level down to that 18 month low.

With the escalating trade tensions between the United States and China, US stocks were sold off heavily and it triggered global growth fears.  U.S. President Donald Trump has threatened to put 25% tariffs on $325 billion in Chinese goods that remain untaxed. President Trump has signaled he is content leaving the duties in place, arguing they will damage China more than the U.S.  The president has repeatedly claimed China bears the brunt of the costs from the tariffs. But the burden falls largely on U.S. businesses and consumers.  The Chinese Finance Ministry said Monday that China will raise tariffs on $60 billion in U.S. goods in retaliation for the Trump administration’s latest decision to increase duties on $200 billion worth of Chinese products.  China will increase tariffs on more than 5,000 products to as high as 25%, while duties on some other goods will increase to 20%. Those rates will rise from either 10% or 5% previously.  The move follows President Trump’s decision to raise duties on $200 billion in Chinese products to 25% from 10%. The world’s two largest economies have struggled to sign a trade deal and end a widening conflict that threatens to damage the global economy.  Last week U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin said that China had backtracked from commitments made during trade negotiations.