2022-12-15 • Updated
China may respond to US House Speaker Nancy Pelosi's visit to Taiwan with military provocations, including firing missiles near Taiwan or large-scale air or naval activities. Taiwanese and US media say Pelosi plans to visit Taipei on Tuesday night, but there’s no official confirmation. However, responding to reporter questions on Tuesday, Taiwan's Premier Su Tseng-chang said the island "warmly welcomes" any foreign guests. He added that Taiwan "would make the most appropriate arrangements" for visitors.
China's leader Xi Jinping believes in the correctness of the principle of a "united China." According to his beliefs, Taiwan historically belonged to China, so it must be returned in any way.
However, it’s not the only reason. Taiwan's electronics sector attracts the most significant share of foreign investment. Indeed, Taiwan's significance to the global semiconductor industry cannot be understated. Taiwan Semiconductor Manufacturing Company (TSMC) is the world's largest contract chip manufacturer and Asia's most valuable listed company at $600 billion. Much of the world's global semiconductor supply chain relies on Taiwan.
Taiwanese exports across the strait to mainland China were at an all-time high in 2021, but perhaps more importantly, the small island nation has China in a chokehold over semiconductors. In 2020, China spent more on importing chips than it did oil (many experts believe China is stockpiling chips).
There’s a risk that any Chinese invasion of Taiwan would damage or destroy much of the tech infrastructure China relies on to feed its electronics and manufacturing industries with crucial components. The invasion might make Taiwan's semiconductor industry the spoils of war, but, equally, the Taiwanese might be ready to destroy semiconductor plants themselves, most notably TSMC's network of advanced factories, to deprive the Chinese of some of those spoils.
Moreover, it’s questionable whether the Chinese could operate the fabs without the cooperation of the world-beating TSMC team of managers, researchers, and engineers, at least for a few years.
XAUUSD, weekly
Gold will break above $1785 and fly towards $1830 on escalation.
US dollar, daily
US dollar bounced off the local support of 105.00, and the uptrend is still valid. Any escalation will push the greenback’s index to 110.00, pressing other currencies down versus the USD.
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Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
Bearish scenario: Sell below 1.0820 / 1.0841... Bullish scenario: Buy above 1.0827...
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