GLOBAL MACRO: Deal With NAFTA More Important To US Economy Than With China
Mexico and Canada are highly exposed to the US and have reached deals to delay 25% tariffs by 30 days. China didn’t come to an agreement and a 10% trade tax has been imposed on all US imports from China. It has retaliated with export controls on certain minerals, an anti-trust investigation into Google, and 10-15% tariffs on oil, coal, LNG and agricultural machinery imports from the US. The key though is that the US is less exposed to trade restrictions than all the regions it is targeting.
- US goods exports account for around 7% of GDP compared with 26% for China & Canada and 20% for the EU. Mexico is a lot closer at 8%. Thus the US can weather a trade war better than the others.
- US merchandise exports to China account for around 7% of its total and only 0.5% of GDP. In comparison, China’s shipments to the US are worth over 14% of its exports and around 2.8% of GDP. Thus it is not surprising that China didn’t respond to the US’ universal 10% tariff with a universal tariff of its own.
US merchandise exports by destination % total 2024
- Around 13.5% of US imports are from China worth about 1.5% of GDP. Mexico and Canada together are around 28% of imports and over 3% of GDP. Again it is not surprising that the latter could find common ground with the US and that the US felt it didn’t have to form a deal with China. While a 10% tax on Chinese imports will lift prices, particularly in certain sectors, overall it is less likely to be an issue for the US economy than 25% on NAFTA members.
- Just under 20% of US imports come from the EU worth 2% of US GDP and 18% of US exports go to the region worth 1.3% of GDP. There is likely room to negotiate a deal with the EU too.
US merchandise imports by source % total 2024
Source: MNI - Market News/Refinitiv
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JGB TECHS: (H5) Returns Lower
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 144.48/146.53 - High Nov 11 / High Aug 6
- PRICE: 142.12 @ 15:01 GMT Jan 03
- SUP 1: 141.65 - Low Dec 30
- SUP 2: 141.56 - 1.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 141.05 - 2.000 proj of the Aug 6 - Sep 3 - 9 price swing
Markets slipped on the hawkish Fed and are yet to fully recover, touching 141.65 on the way lower. Medium-term trend signals on the continuation chart continue to point south. A resumption of the trend would pave the way for a move towards 141.56, a Fibonacci projection point on the continuation chart. A stronger recovery would open 144.48, the Nov 11 high. Further out, key resistance is at 146.53, the Aug 6 high (cont).
USDCAD TECHS: Bull Flag Highlights A Clear Uptrend
- RES 4: 1.4669 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4392 @ 15:50 GMT Jan 3
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4307/4232 20-day EMA / Low Dec 17
- SUP 3: 1.4136 50-day EMA
- SUP 4: 1.4011 Low Dec 5
USDCAD is unchanged and bulls remain in the driver’s seat. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4307, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Southbound
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6408 50-day EMA
- RES 2: 0.6341 High Dec 18
- RES 1: 0.6247/6282 High Dec 30 / 20-day EMA
- PRICE: 0.6204 @ 15:21 GMT Jan 3
- SUP 1: 0.6179 Low Dec 31
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
A bearish trend condition in AUDUSD remains intact and the pair continues to trade closer to latest lows. Recent weakness maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection. Initial firm resistance to monitor is 0.6282, the 20-day EMA.
