06.07.202210:22 Forex Analysis & Reviews: US and China resumes trade talks

Euro and pound fell on Tuesday, indicating the real concern of investors about the impending recession of the world economy. The growing demand for safe-haven assets also proves that currencies such as dollar is more dominant in the markets.

On a different note, US and China held a virtual meeting yesterday to discuss a number of macroeconomic issues. The Chinese media mentioned talks of tariffs and US sanctions, but not geopolitics. Meanwhile, the US did not mention tariffs or sanctions, but noted the impact of the geopolitical crisis in Ukraine.

China's report highlights the importance of coordinating the macroeconomic policies of the two countries and maintaining the stability of global supply chains. The statement also mentioned tariffs and sanctions on China, which US President Joe Biden said could be reduced, but has not yet come to concrete actions

The US report, meanwhile, did not mention tariffs or sanctions, but said Treasury Secretary Janet Yellen raised issues of concern such as China's unfair economic practices. Since January 2021, the Biden administration has not engaged in any economic negotiations with China and has not sought any further trade concessions. Instead, economic policy in Asia has focused on a new trade deal with allies in the region, which is still in its early stages.

Reports from both countries described the conversation as "candid", expressing hope for continued dialogue and the need to keep in touch.

Economists note that the removal of tariffs will have a marginal impact on US inflation and China's trade, while a possible recession in the United States poses a far greater threat to China's prospects. Chinese authorities have repeatedly criticized US sanctions against firms and companies such as Huawei, and have expressed outrage at additional tariffs on goods.

Going back to the forex market, a lot depends on buyers as only a return to 1.0280 will help euro to cope with the developing bearish scenario. The breakdown of the level will help EUR/USD rise to 1.0340 and 1.0390, while a further drop to 1.0230 will bring the pair to 1.0190, 1.0160 and 1.0110.

Pound is also moving towards the 2020 lows, where a breakdown of 1.1900 will lead to a further decline to 1.1860, 1.1820 and 1.1740. But if buyers manage to push GBP/USD above 1.1970, the pair will rush to 1.2020, 1.2070 and possibly 1.2120.