It's been a wary night of trade with risk-off flow dominating Asian and early Europen dealing as escalating tensions between US and China had investors on edge.

The dollar was mildly bid across the board and US stock index futures were lower by about 50 basis points with markets fearful that US-China war of words may become a much more serious political conflict.

The latest salvo from Beijing was the introduction of a new Security Law. As well as criminalizing "treason, secession, sedition (and) subversion" against the central government, it will also enable Chinese national security organs to operate in the city "to fulfill relevant duties to safeguard national security in accordance with the law." The law would effectively destroy much of Hong Kong's autonomy and sent a shiver through the island's capital markets with Hang Seng dropping the most since 2015. China was quick to note that this was an internal matter and would not accept any interference from the outside world but given the already negative sentiment against China in the US Senate some political and economic response is sure to come.

For now, the markets remain wary rather than reactive with only a muted response in price action as traders watch the Sino-US relations deteriorate. The bulls continue to control the market as every dip is bought and the recovery thesis trumps all geo-political risks for now. With no US data on the docket, it will be interesting to see if the bulls can rally prices into the long holiday weekend. We are skeptical they can do so. Given the dour economic backdrop and the very real possibility of violence in Hong Kong, the risks to the downside have increased markedly and markets will only be able to ignore them for so long before selling pressure begins to take hold.

Author

Boris Schlossberg

BKTraders and Prop Traders Edge

Boris Schlossberg was key speaker at the FXstreet.com International Traders Conferences 2010. Mr. Boris Schlossberg is a leading foreign exchange expert with more than 20 years of financial market experience.

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

GBP/USD softens to near 1.3600 as BoE hints further rate cuts

The GBP/USD pair loses ground to near 1.3610 during the early Asian session on Monday. The Pound Sterling softens against the Greenback amid growing expectations of the Bank of England’s interest-rate cut. Traders will take more cues from the Fedspeak later on Monday.

Gold eyes acceptance above $5,000, kicking off a big week

Gold is consolidating the latest uptick at around the $5,000 mark, with buyers gathering pace for a sustained uptrend as a critical week kicks off. All eyes remain on the delayed Nonfarm Payrolls and Consumer Price Index data from the United States due on Wednesday and Friday, respectively.

Top Crypto Gainers: Aster, Decred, and Kaspa rise as selling pressure wanes

Altcoins such as Aster, Decred, and Kaspa are leading the broader cryptocurrency market recovery over the last 24 hours, as Bitcoin holds above $70,000 on Monday, up from the $60,000 dip on Thursday.

Weekly column: Saturn-Neptune and the end of the Dollar’s 15-year bull cycle

Tariffs are not only inflationary for a nation but also risk undermining the trust and credibility that go hand in hand with the responsibility of being the leading nation in the free world and controlling the world’s reserve currency.

Bitcoin, Ethereum and Ripple consolidate after massive sell-off

Bitcoin, Ethereum, and Ripple prices consolidated on Monday after correcting by nearly 9%, 8%, and 10% in the previous week, respectively. BTC is hovering around $70,000, while ETH and XRP are facing rejection at key levels. Traders should be cautious: despite recent stabilization, upside recovery for these top three cryptocurrencies is capped as the broader trend remains bearish.