FX Commentary – Safe Havens In Demand On Turkey’s Uncertainty

Market Talk
– The dollar was stronger on Monday morning in Asia, on worries that events in Turkey will cause disruptions in other financial markets, which supported the dollar because of its status as a safe-harbour currency. The dollar had advanced against major currencies, after the Federal Reserve allowed a pandemic-driven break on capital requirements to lapse.

– Treasury yieldseased from more than one-year highs, edging down five basis points to 1.68%, suggesting some investors favoured safe havens. Bonds had another wobble on Friday when the Federal Reserve decided not to extend a capital concession for banks, which could lessen their demand for Treasuries.

– A decline in risk appetite weighed on the Australian dollar, which fell to $0.7718. The New Zealand dollar also fell slightly to $0.7148. Further declines in the Aussie and Kiwi are likely to be limited because both currencies will still benefit from rising commodity prices and acceleration in global trade,

– The yen climbed against the euro, the AUD, and the NZD, with the safe-haven asset boosted by expectations that Japanese investors will cut their losses on the lira, which they had bought due to its high rates, and unwind other popular cross yen trades.

– Gold declined on Monday morning trade as the dollar remained resilient on safe haven buying despite a slight drop in 10-year Treasury bond yields, which held near the highest level in more than a year, weighing on the precious metal.

Chart Focus EUR/JPY
Key Points
1. Sell EUR/JPY recommendation.
2. Sell EUR/JPY at 129.40. Stop at 129.75 and target at 128.40.
3. Uncertainty in Turkey is likely to weigh on the Euro and favour the yen.
4. A Double Tops chart pattern and bearish MACD and Stochastic are both warning of a bearish price trend ahead.

Fundamental Comments
1. Uncertainty in the Turkey is likely to weigh on the Euro currency.
2. Uncertainty in Turkey is likely to lead to buying of the safe haven yen.

Technical Comments
1. Price has broken below a Double Tops chart pattern which is a hinting of a bearish price trend.
2. Stochastic and MACD had warned with divergence of a possible price high and both are hinting of a bearish price trend ahead.

Key Levels


Technical Overview
USD/JPY – Price was unable to move above 109.36 and we saw a price decline to 108.56 this morning. We are expecting the decline to continue lower to 108.30. A break of this support would be a bearish hint. It confirms a Double Tops chart pattern and a possible price move to 107.30. MACD is showing weakness. Stochastic and 20EMA are both hinting of a bearish price trend ahead


EUR/USD – Price has declined to a low of 1.1875 which was just below the previous week’s low. However, price has managed to bounce up above the Double Tops chart pattern neckline at 1.1881.  We do not consider this as a confirmation of the Double Tops chart pattern. Stochastic is near to the oversold zone but MACD and 20EMA remain bearish.


GBP/USD – Price has declined to 1.3817 this morning, which is just above the Double Tops chart pattern’s neckline. A break of this support at 1.3810 is likely to trigger a price move to 1.3615 over the next 3-4 weeks. However Stochastic is close to the oversold zone. 20EMA is hinting of a bearish trend but MACD is neutral at the moment.


XAU/USD – Gold had rallied on the back of Powell’s comments to a high of $1755.35 on Thursday morning but has not been able to build on its gains. Price had declined to a low of $1718.90 and price looks likely to trade within this range of $1755 to $1718 for the next couple of days. A break of $1732 is likely to send price lower to test the support at $1718.90 within the next 24 hours. Inability to move below will result in a likely range movement.


AUD/USD – Last Friday, we had a sell recommendation on this pair which was filled at 0.7760 when price reached a high of 0.7769. Price has declined to a low of 0.7704 this morning. Stochastic is declining and moving towards the oversold zone. MACD remains bearish and 20EMA is hinting of a bearish price trend ahead. We would recommend bringing stop lower to 0.7775 and keeping profit target at 0.7640.


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