Dollar attracts ‘safe haven’ buyers

EUR USD (1.2530)
The start of the European session on Monday saw the single currency being dropped like a hot potato. By lunch time it had already been a big figure down and in NY it almost hit the ’psychological’ $1.25 level. With geopolitical concerns in the Middle East already on traders’ minds for more than a week, the ‘safe haven’ value of the dollar was again at the forefront. It is clear that events that are more ‘visible’ and regularly repeated on television tend to leave a bigger impression and are also readily available for traders to recall. Some analysts were even drawing the attention to the fact that the flight-to-safety effect is more inclined to occur when the market is already caught in a bearish view, in this case, for the euro. According to this belief, the market’s reaction could therefore end up being more position driven and is also linked to the source of the shock.

Nevertheless, the euro could again not muster any support yesterday from economic data. It seems as if the short -term crowd is waiting for the dollar to settle before they do anything. Thus, with hardly any short -term demand and the market struggling to digest the supply, our latest EUR-Sentiment Survey* confirmed that medium-term market participants have also not really been the ones to blame for the euro’s recent wave of weakness. It is, however, true that some took advantage of the range, but for now they are probably waiting to see even lower rates than the mid-June 1.2485 low before they would act.

Moreover, with optimism a dash stronger while the euro is much lower, it simply confirms that a long-term player is indeed prominent on the selling side. The single currency even slipped deeper into its previous sideways range yesterday and the current risk is for a further setback to 1.2410 or even to 1.2360/70. We would opt for a bullish strategy at the first point with the limit below the last. In the event of a positive orientation, the target will be a recovery 1.2665.

USD JPY (116.95)
Objective achieved. With the dollar having finally exited even its former consolidation (113.45 - 116.70) to the upside, this move has also now cleared the way for further gains to our second 118.50 target. The dollar surged to a three month high against the yen as geopolitical concerns and the flight to-safety value of the currency are still the attention grabbers. For today, we reckon with intermediate resistance at 117.85. To the downside, we are counting on demand at 116.30/40, which is also the sharply tightened limit. Below this support, the risk would increase that the recent strength has been nothing but a false-break.

EUR JPY (146.55)
The cross is still full of zest and remains in a position to deliver fresh highs at 147.70 and thereafter to as high as 148.60, which also mark the next reliable resistances. Any weakness will run into supports at 146.10/20 and at then at 144.80. The former marks the entry level for a bullish strategy with a tight limit. In the event of a positive orientation the second resistance acts as a target.

EUR GBP (0.6880)
The outlook remains the same. To the downside expect support at 0.6860/70. This also indicates the spot where we would turn bullish with a tight limit. However, below there, the demand situation becomes flimsy ahead of 0.6730. Overhead, we expect bouts of selling at 0.6920 and at 0.6965. The latter also marks the objective in the event of a bullish strategy.

GBP USD (1.8205)
Sterling slipped below its best support at 1.8275/90 and as mentioned yesterday, has opened the door for further weakness to 1.7930, also the current objective. Intermediate support can only be expected at 1.8015. The limit within the bearish orientation must be set tight to 1.8345/50.

AUD USD (0.7490)
The AUD pulled away from its recent highs, but it remains overall in a neutral position. On a dip, expect to come across support at 0.7445/50. Below this point, the demand situation would deteriorate and result in a setback to 0.7360. Overhead, supply is lurking at 0.7510 and at 0.7565. The latter must still be overtaken for a bullish resolution