Global macro overview for 11/01/2018

Policy makers in Beijing reportedly recommend slowing or stopping purchases of US government bonds as part of the review of the policy of investing giant currency reserves - Bloomberg reports, citing its anonymous sources. The agency has not received official confirmation of its information at SAFE (State Administration of Foreign Exchange) - the Chinese agency responsible for managing foreign reserves.

China is next to Japan the largest foreign creditor of the United States. According to the data of the US Treasury Department, at the end of October 2017, the State had Treasury bonds based on a total of USD 1,198.2 billion. US obligations towards Japan amounted to 1093.9 billion USD. China's foreign exchange reserves are the largest in the world and amount to 3.1 trillion dollars.

It is true that China has not been increasing its commitment to US debt for several years, but the possibility of abandoning the purchase of US bonds in the world of finance is considered the equivalent of the use of nuclear weapons. Therefore, the market reaction to Bloomberg's revelations was determined, but not panicky. Yet.

Let's now take a look at the SPY (SP500 ETF) technical picture at the H4 time frame. The market has made just another higher high at the level of 275.26, but then opened with a gap down after the Chinese news was released. Currently, the price is trading at the short-term trend line support and in case of a further breakout, the next technical support is seen at the level of 272.18.

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