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Chinese yuan consolidates losses
It’s not often that EUR/USD traders look to the Chinese exchange rate for clues on where the single currency might go next, but such is the case this week as the trade battle between the US and China is dominating the financial markets.
Initially, it was a tweet from the US president about more tariffs that spooked the financial markets. A drop in the yuan below the key 7 level versus the greenback back intensified fears.
The decline in the Chinese currency stirred up speculation that China is fighting back by devaluing the yuan. However, it seems that there is an attempt to contain the drop in the yuan as the exchange rate has fallen into a range.
I think it is important to have a correct assessment of sentiment here. While equities have bounced back and the dollar decline looks like it has stalled out a bit, I don’t think the backdrop has changed in such a manner that warrants a reversal to erase the price action across financial markets in the early week. At least not in the
Although there was an intraday push above the resistance level, the pair closed below it on an intraday basis. Not only that, a doji candle was posted in the process which signals exhaustion and builds towards the case for a pullback.
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