Sentiment Improving on China Reopening, But Caution Remains

China has been continuing coronavirus restrictions and lockdowns but from 8 January the government will reopen its borders and lift quarantine measures. They have been applying restrictions for three years now, which has affected production and sent prices higher, since a large portion of global goods are produced in China at low prices.

Finally, they are set to label Covid as a disease that only requires “necessary treatment and measures to curb the spread”, pretty much like the flu. That will officially put an end to the Covid-zero policy. It’s a big change and it will have significant implications globally depending on how fast things progress in the right direction. For now, China’s “openness” will still be limited, but we’re likely to see them go back to normal in a few months.

The easing of supply disruptions is a welcomed development for the global economy, while a big impact will be felt from the lifting of border restrictions, which will see consumption activity increase drastically. We saw how travel-deprived the rest of the world was and upon the slow reopening over the past year-and-a-half, tourism bounced back up.

China travelers will be catching up now and that pent-up demand will also show up in other parts of the world. So this is good news for the global economy and risk assets were climbing higher earlier today, while the USD was declining.

EUR/USD H1 Chart – The 200 SMA Held as Support

Buyers are back in control after the bounce off the 200 SMA 

Although we saw a quick reversal in the last few hours, but the reversal ended and risk currencies are turning bullish again We decided to open a buy EUR/USD signal as this pair was finding support at the 200 SMA (purple) on the H1 chart, while the previous candlestick closed as a pin, which is a bullish reversing signal after the decline. So, we’re long again on this pair after the yesterday’s buy signal closed in profit

EUR/USD