Sea of red in world stocks as investors worry over trade war
It was a sea of red in the world’s stock market as investors continued to react to the tariff threat that was announced by Donald Trump last week. In response to the announcement, the Chinese central bank allowed the country’s currency to weaken sharply against the USD. The renminbi dropped below the RMB 7 per USD for the first time since the 2008 global financial crisis. In a statement by the People’s Bank of China, the bank blamed this on the unilateralism, protectionist measures and the expectations of tariffs. In a tweet, Donald Trump accused the country of currency manipulation and asked the Fed to intervene.
The euro rose against the USD after a series of mixed economic data from the region. In France, the services PMI increased to 52.6 from the previous 52.2. In the UK the composite and services PMI increased to 50.7 and 51.4 respectively. This was an increase from the previous 49.7 and 50.2. On the other hand, in Germany, the composite and services PMI declined to 50.9 and 54.5 respectively. In the EU, the services PMI declined to 53.2 from the previous 53.3. Later today, the market will receive the ISM non-manufacturing data from the U.S.
The price of crude oil declined after the Iran Revolutionary Guard (IRG) announced that it had captured an oil tanker at the Strait of Hormuz. In recent months, the situation at the Strait has been difficult as Iran continues with the attacks. These attacks are happening as the country gets more desperate following the sanctions by Donald Trump. The decline was also in response to China’s central bank devaluing its currency. Investors believe that the trade war could lead to lower demand for oil.
The EUR/USD pair continued the rally that was started on Thursday last week when the price reached a low of 1.1026. Today, the pair reached a high of 1.1185, which was the highest level since July 25. On the hourly chart, the day’s high was along the 61.8% Fibonacci Retracement level. The pair is trading above the 25-day and 50-day moving average while the RSI has reached the overbought level. There is a likelihood that the pair will retest the 50% Fibonacci level of 1.11500, and then resume the upward trend during the American session.
The XBR/USD pair declined to an intraday low of 60.70. On the four-hour chart, the pair is trading below the 25-day and 50-day moving averages while the RSI is trading at the oversold level. The pair is also forming the head and shoulder pattern. A further decline below the current level will likely see the pair test the important support level of 50 as shown below.
The USD/CHF pair declined to an intraday low of 0.9737. This was a continuation of the sharp decline that started on Thursday last week. On the four-hour chart below, the pair is trading below the 25-day and 50-day moving averages while the RSI and the accumulation and distribution indicator have fallen sharply. The momentum indicator has also declined sharply. The pair will likely continue moving lower to test the important support of 0.9700.