Don't Overinterpret the News

Be careful out there. Do not immediately jump into shorting after each and every not-so positive headline from the US-China talks. US indices pushed to fresh new highs as both sides agreed to roll back tariffs. We have yet to get a confirmation from the US. We argued in this week's English and Arabic Premium videos against rushing into trades, highlighting our suggested entry level in terms of price and time.

The Negative

On Wednesday afternoon US time, reports emerged that the US-China trade deal may be pushed back with sides struggling to agree on a location, and more likely on the contents of an agreement. Some said the agreeing on the location of the US-China trade deal signing could be the canary in the coalmine. The latest reports say China has refused Trump's proposal to have a ceremony in the US.

This would have seeming been an easy thing to give up for Beijing but Xi must be wary of a last-minute surprise by Trump or by being used as an election prop. Now reports say there are proposals for a meeting in Europe.

Worse is a Reuters report saying that the deal may not get done until December. Until this week, markets were fed a steady diet of politicians saying the deal was virtually done. That goosed risk assets but now it appears there are more than just scheduling and location problems.

China is demanding the removal of Sept 1 tariffs and perhaps others in exchange for deal. On their side, they have moved to protect intellectual property and on Thursday there was the announcement of a joint prosecution on fentanyl; an issue the US has tied to a deal.

Yet it's tariffs at the heart of the trade deal and the market is beginning to worry. AUD/JPY traded at the lows of the week on Thursday after the rally in the trade-sensitive pair stalled well-ahead of the 200-dma.

The Positive

Still, the market remains decidedly optimistic. Pushing back a deal a few weeks isn't itself a problem but if there are any further signs of a breakdown, the market's patience will be exhausted. Also seeming to help sentiment, is China's announcemen of high-profile convictions to cut the illegal flow of fentanyl opioid to the US.

A good example of how much trade is dominating the market is AUD this week. The news has been good and that extended to Thursday when the Sept trade surplus jumped to $7180m compared to $5050m expected. The prior was also revised higher. Lately, trade numbers have been showed falls in both imports and exports but they both rose 3% in Sept in Australia. Yet a 10-pip rally was wiped out in minutes and it's a laggard again today.