Set ups for the week ahead
Hi everyone,
In this week’s educational section, let’s look at the Chinese economy.
Understanding China’s economy requires examining its key features, growth drivers, challenges, and global impact;
Size and Growth: China has the world’s second-largest economy after the United States. Its economy has been growing rapidly for decades, driven by factors like a massive population, industrialisation, urbanisation, and export-oriented manufacturing.
Reforms and Opening Up: China’s economic transformation began with Deng Xiaoping’s reforms in the late 1970s. These reforms shifted the country from a centrally planned economy to a socialist market economy, emphasising private enterprise, foreign investment, and global trade.
Manufacturing and Exports: China is known as the “world’s factory” due to its vast manufacturing capabilities and low-cost labour. It has been a global leader in producing goods such as electronics, textiles, and consumer products, making it a major player in international trade.
Infrastructure Development: China invested heavily in infrastructure, building extensive transportation networks, energy systems, and urban areas. This has facilitated economic growth and improved connectivity.
State-Owned Enterprises (SOEs): Despite market reforms, China retains a significant presence of state-owned enterprises in strategic sectors like banking, energy, and telecommunications. These SOEs often receive preferential treatment and government support.
Technology and Innovation: China has been working to transition from a low-cost manufacturing hub to a high-tech economy. It has made strides in areas like telecommunications, e-commerce, artificial intelligence, and renewable energy.
Consumer Market: The rising middle class and urbanisation have led to a growing consumer market. This shift has prompted a focus on domestic consumption and services, moving away from an export-reliant growth model.
Global Trade and Investment: China is a key player in global trade and investment. Initiatives like the Belt and Road Initiative (BRI) aim to enhance connectivity and trade with countries across Asia, Africa, and Europe.
Challenges: China’s economy faces challenges including an ageing population, environmental degradation, income inequality, high corporate debt, and a need for financial reforms.
Geopolitical Impact: China’s economic rise has led to increased geopolitical influence. It’s a member of various international organisations and has become a major player in diplomatic and economic negotiations.
Why care as a Forex trader?
The economic relationship between China and the United States is complex and multifaceted, encompassing trade, investment, finance, and various other dimensions. Some key points to understand about their economic relationship:
Trade: China and the United States are two of the world’s largest trading nations. They have significant trade ties, with China being one of the largest sources of imports for the U.S. and the U.S. being one of the largest markets for Chinese exports. Goods traded include consumer products, electronics, machinery, and agricultural products.
Trade Imbalance: The U.S. often runs a trade deficit with China, meaning it imports more goods from China than it exports to China. This has been a point of contention and has led to discussions about fair trade practices and currency valuation.
Investment: China and the U.S. have invested in each other’s economies. U.S. companies have sought access to China’s large consumer market, while Chinese investors have acquired U.S. assets and invested in various sectors. However, national security concerns and regulatory scrutiny have sometimes affected these investments.
Supply Chains: Both economies are deeply integrated into global supply chains. Many products involve components or processes that cross borders, making their economies interdependent in certain industries.
Intellectual Property and Technology: Concerns have been raised about intellectual property theft and forced technology transfers from foreign companies operating in China. This has been a point of tension in the economic relationship.
Currency and Trade Practices: Accusations of currency manipulation and unfair trade practices have been raised by both countries at various points, leading to trade disputes and negotiations.
Financial Interactions: China holds a significant amount of U.S. government debt (Treasury securities). This has implications for both countries’ financial stability and gives China some leverage over U.S. fiscal policies.
Global Economic Impact: The economic health of both China and the U.S. has global ramifications. Changes in one economy can affect markets, currencies, and trade flows worldwide.
Geopolitical Dynamics: The economic relationship is intertwined with broader geopolitical considerations. Tensions in other areas such as security, human rights, and territorial disputes have at times spilled over into economic discussions.
Trade Agreements and Negotiations: Both countries have engaged in trade negotiations and signed agreements, such as the Phase One trade deal in 2020, which aimed to address some trade issues and improve market access.
It’s important to note that the relationship between China and the United States has evolved over time and can be influenced by political, economic, and social developments
Let’s look at some key charts.
DXY chart:
Broke out of a major area as shown before. Pulled back into the area this week and I now looking for price to ‘slow down’
Energy & Metal Prices;
Gold;
Still above the 200 and 55 and still very bullish to me.
Oil;
Bounced off a big area and testing the 200 now.
Bitcoin;
Still consolidating at a big area (30000 is a BIG level for BTC). Break and hold above this level could see BTC go on a run.
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You can also follow us on Twitter https://twitter.com/marcwalton
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Red flag news:
Relatively quiet news week, this week.
MAJORS
See the video for a more detailed explanation on my thoughts on the majors.
EUR/USD: Long from 1.0800
USD/CHF: Short from 0.93400
GBP/USD: Long from 1.2500
AUD/USD: 0.67800 is key for me.
NZD/USD: 0.6200 is key for me.
USD/CAD: Long from around the current price point.
USD/JPY: *Long from 135.00 or 136.00
CROSSES
EUR/GBP: Short from 0.8650
EUR/AUD: Long from 1.6000
EUR/CAD: 1.46800 for a long
AUD/CAD: 0.900 is key. Looking to short.
GBP/AUD: Long from 1.9500
GBP/CAD: Long from 1.6800
GBP/CHF: See video.
AUD/NZD: Short from current position
As always, remember correlation! -Especially when taking more than one JPY trade!
M3 -Shorter timeframes.
I do my analysis on daily and weekly charts first and make a note of the MAJOR areas of support and resistance. Then copy them onto Pierre’s Earth and sky template. Then I make a note of the weekly & monthly pivots points and add them to the charts. You will see lots of opportunities line up during the week. The important thing then is to select a bias for the next few days and do NOT take trades if the price is too near a trend line or pivot. Ideally, you want to buy when the price is near a major support and or pivot point line and has the potential to make at least 40 pips. Vice versa for a short.
New members, please note: If I am looking to take a trade long, for example, 1.5000, I place my order 10 pips above & 10 pips below for a short. This is because price often does not quite reach a major line and you need to allow for spreads.
We are NOT a “tipping service” our aim is to teach you how to trade for yourself.
Watch the video below for more detailed explanations of this week’s analysis and trade plan (click the 4 arrows bottom right to view full-screen):
Regards
Thinus
