US-China Talks Lift Sentiment, Safe-Havens Slip

Markets entered the week with a cautiously optimistic tone as fresh progress in U.S.-China trade talks rekindled hopes for de-escalation. High-level delegations from both sides are reportedly meeting in London, with U.S. officials suggesting a potential phone call between President Trump and President Xi is in the works.

Risk-on Sentiment Fueled

This diplomatic thaw has fueled risk-on sentiment across global equities and weighed on traditional safe-haven assets such as gold and the Japanese Yen.

Gold prices, which had rallied on geopolitical uncertainty and inflation hedging, are now showing signs of cooling as investors rotate back into risk assets amid hopes for a breakthrough.

Meanwhile, the Japanese Yen also saw a fresh round of selling as USDJPY climbed back above 145.00 on trade talk optimism.

Gold: Losing Shine in the Short Term?

Gold, which had surged in recent months on fears of renewed trade war and uncertainty, is now encountering resistance as risk appetite improves. Spot gold prices have retreated from recent highs near $3,400, with investors rotating back into equities and high-yield assets amid hopes for trade stability.

Gold may continue to face pressure in the near term. However, the structural demand for gold as a long-term hedge and uncertainty buffer isn’t likely to disappear. Furthermore, if the U.S.–China talks fail to produce tangible outcomes—such as a rollback in tariffs or restrictions on mineral exports—market volatility could return, re-energizing safe-haven demand.

Technical Outlook

XAUUSD, 4-H Chart Analysis | Source: Ultima Market MT5

With resistance at $3400, the next key short-term level lies near $3,335, where gold may face another round of pullback toward the $3,250 region. Still, the key structural support remains at $3,200.

Japanese Yen: Under Pressure for Now

The Japanese Yen, another key safe-haven asset, is also facing downward pressure. USDJPY has climbed back above 147.00 amid reduced demand for haven currencies. Traders are watching to see whether U.S.–China talks lead to a real easing of trade tensions, which would further support risk sentiment and likely weaken the Yen.

Meanwhile, the lack of aggressive moves from the Bank of Japan in its tightening path has limited upside for the Yen bulls. This may continue to weigh on the currency amid renewed risk-on momentum.

However, this picture remains fragile. If markets begin to doubt the durability of the trade thaw—or if inflationary concerns flare up due to ongoing tariffs and supply chain disruptions—the Yen could quickly regain ground. A retreat in global equities or rising concerns over U.S. fiscal sustainability could trigger a reversion to risk-off trades favoring the JPY, though that’s more likely to happen after July.

Technical Outlook: USDJPY

USDJPY, 4-H Chart Analysis | Source: Ultima Market MT5

Technically, USDJPY is approaching the upper end of its recent range. If the pair breaches 145.00 with sustained momentum, it may test new cycle highs toward 146 or beyond. However, 146 remains a key resistance for now.

Summary

While recent U.S.–China diplomacy offers hope, safe-haven assets like Gold and the Yen are in a holding pattern—facing near-term headwinds from improved sentiment but standing ready to rebound on any setback. Investors are watching not just headlines, but concrete actions. A failure to deliver real policy clarity could swiftly reverse the risk-on tone and reassert demand for defensive assets.

Until then, we are likely to see risk-on sentiment fuel momentum in risk assets, while applying pressure on safe-haven assets.

Disclaimer

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