Currency Traders Looking For Safety - USD Still Hanging In There

Published date: 11/10/2018

When we have events such as last night, with stock markets falling out of bed to the extent that they did, it is hard to avoid the traditional safe havens. Despite Wall St losses to the tune of 3-4% among the leading indices, the JPY move across the board may have been seen to be on the modest side, though naturally, we have to see if there is any follow through, at which point we then have to expect currencies to move in tandem.

Elsewhere, the CHF was also nudged higher, though marginally so as the USD dipped under 0.9900, as did EUR/CHF below 1.1400. Both pairs are looking steady this morning.  

Given the USD has been a safe haven throughout the past 6 months or so, traders are also struggling to give up on the idea that the greenback has more upside to achieve, despite the fact that US implied rates have reached extended levels - indeed, this is the cause of the stock market sell of in the US. As rates move higher, then cheap money to buy stocks dries up.  

Other factors such the EU fallout with Italy, China's trade spat with the US (or the other way around) and Brexit all add to the mix of risks affecting investor sentiment, and the cocktail of fear has its impact on the market.  

From here, we can see that the market is a little undecided on where to focus interest. USD/JPY tested 112.00 and managed to hold the figure level, however as yet, we are seeing very little bounce.  EUR/USD is also holding in at the mid 1.1500's, having tripped some stops through 1.1540-45 to hit 1.1570 or so.  Cable gains through 1.3200 were limited and brief, though naturally, Brexit headlines will dictate from here.

As such, pressure remains on the risk related currencies, and even though the AUD has again fended off a move past the mid 0.7000's, the pressure is telling. Oil prices were also hit last night and this also led to CAD sales, pushing through 1.3000.  

US CPI due out later on this afternoon, so the reaction to the numbers will be more telling than the actual data itself. We are watching US Treasury yields and how the bond markets will react.  


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