A Trade Deal Is on the Way

[Ben Graham]

Following the meeting, the chief trade negotiators of the U.S. and China announced that they had reached an agreement on several contentious issues, paving the way for Presidents Donald Trump and Xi Jinping to conclude a deal and ease trade tensions.

The statement sparked a wave of optimism in global financial markets, which had long been weighed down by the threat of an escalating trade war. The prospect of lowering tariffs and removing trade barriers opens up new opportunities for mutual economic growth. Companies hurt by the trade tensions can now plan to resume investments and expand their operations, leading to new jobs and higher profits. However, despite the positive sentiment, several questions remain unanswered. The details of the agreement have not yet been disclosed, and the markets are waiting for concrete steps and guarantees of its implementation. It is also important to consider that the interests of both sides may not fully align, and new disagreements could arise in the future.

After two days of negotiations in Malaysia, which concluded on Sunday, a Chinese official stated that both sides had reached a preliminary consensus on issues such as export controls, fentanyl, and tariffs. U.S. Treasury Secretary Scott Bessent later noted that Trump's threat to impose 100% tariffs on Chinese goods had effectively been taken off the table, and he expects China to purchase soybeans as well as postpone large-scale controls on rare earth metals. "I expect the threat of 100% control has disappeared, as has the threat of China immediately implementing a global export control regime," Bessent said. In an interview, he also stated that he believes China will delay restrictions on rare earth metals for a year while they reassess the situation.

Bessent also reported a broad agreement between Trump and Xi Jinping that will extend the existing tariff truce, resolve disputes over the sale of TikTok, and ensure uninterrupted supplies of rare earth metals needed for the production of advanced products — from semiconductors to jet engines.

It is worth noting that the encouraging signals from both sides stood in sharp contrast to the events of recent weeks, when Beijing's announcement of new export restrictions and Trump's retaliatory threat of imposing staggering new tariffs had threatened to plunge the world's two largest economies back into a full-scale trade war.

Now, all attention is focused on the upcoming meeting between Trump and Xi Jinping, scheduled for later this week, which will be their first in-person meeting since Trump's return to the White House for a second term. The American leader stated that direct talks are the best way to resolve such issues. "We'll be talking about a lot of things," Trump said. "I think we have every chance to reach a truly comprehensive agreement."

EUR/USD Technical OutlookAt present, buyers need to work on reclaiming the 1.1650 level. Only then will they be able to target a test of 1.1675. From there, the pair could climb toward 1.1725, but achieving this without support from major players will be quite challenging. The ultimate target would be the 1.1755 high. In case the instrument declines, I expect significant buying activity to appear around 1.1620. If there are no strong buyers there, it would be better to wait for a renewal of the 1.1600 low or to open long positions from 1.1580.

GBP/USD Technical OutlookFor pound buyers, the immediate target is to break through the nearest resistance at 1.3335. Only this will allow targeting 1.3355, above which it will be quite difficult to advance. The ultimate target would be the 1.3385 level. In case the pair falls, bears will attempt to regain control around 1.3305. If they succeed, a breakout of this range would deal a serious blow to the bulls' positions and push GBP/USD down to the 1.3280 low, with potential for a further move toward 1.3250.

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