USD Gains As Investors Go To Primary Destination Amid Trade Tensions
As we have noted in recent weeks, the USD has taken on a safe haven status as much as it has been interested in play, with short-term differentials clearly in favour of the US. We are seeing EUR/USD pushing back to 1.1700 again. Although the moves look cautious and tentative, showing a lack of conviction as the US crank up the trade war a notch with the overnight release of the list of Chinese goods, under the threat of fresh tariffs.
Usually, we would have seen a dash for the JPY and CHF, yet both currencies are on the back foot against the USD, and this suggests the market is buying up US Treasuries as a form of safety. Consequently, USD/JPY is pushing back towards the key trend line resistance we highlighted at 111.50 or so, though both yesterday and in Asia today, sellers were standing their ground.
Looking at the stock markets, the European indices are all in the red, as are commodities. This is naturally weighing on the rest of the major FX currencies, notably the AUD, NZD and CAD. Although the EUR and GBP are also under pressure this morning.
S&P futures are showing a negative balance of 21pts on the day, however, this should strengthen the resolve of the offers in USD/JPY. Markets have a tendency to react in a delayed manner, and current price action should be viewed with these key levels in mind.