FX Market Wrap: Safe-Haven Plays Support the USD

Market Analysis /
21 Nov 2018
  • US Dollar bounces as bond prices rise on risk-aversion
  • EURUSD pulls back from overbought levels
  • AUD underperforms as stocks and commodity selling weigh on the currency

Another bout of risk-aversion on the broader financial market allowed for a bounce in the US Dollar. The greenback found buying-support as part of a safe-haven play which also saw a rise in US Bond prices which further boosted the Dollar.

The US Dollar Index (DXY) gained around 0.7% as market volatility saw an increase, as evidenced by another session of heavy selling on Wall Street.

With the US Dollar on the rise, the Euro was on the slide as the single currency slipped back below the 1.14 level. Earlier, the EURUSD had moved to within 30 pips of the psychological 1.15 handle but this was a bridge to far for the moment at least due mostly to the stronger Dollar, but in part also due to the Euro technical picture having displayed some overbought signals after its recent push higher. On the low side, medium level support lies at 1.1310 while on the top side 1.1460 will again be a zone of resistance.

The fresh round of USD buying subdued the British Pound with the Cable rate dipping back below 1.28. Bank of England Governor Mark Carney did his best to sooth Brexit fears by saying he was quietly confident that the UK financial sector was well placed to handle a transition out of the EU. But this wasn’t enough to offset the general market pessimism kept the GBPUSD rate trading below its 50-day moving average.

The Australian Dollar was an underperformer for the day, with the unwinding in risk-assets across the board hurting the AUDUSD rate. The sell-off in stocks and the rise in US bonds saw the AUD lose more ground against the USD than the likes of the Euro and the Sterling, while the slump in the oil price and softer spot gold also did little favours for the commodity-linked Aussie Dollar.

Overall it was a strong session for the US currency, but whether this was a one-off or the start of a trend remains to be seen. If global growth worries do cause a Fed re-think on rates in 2019 this would be negative for the USD, but safe-haven flows on growth worries abroad could limit downside moves in the meantime.

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