Risk Aversion Deepening on Trade War & Middle East Tension

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Nothing To Write Home About in USD

The US dollar continued its stagnation over the European on Thursday with the index trading 97.37 last, remaining well within the range of the week so far. A lack of tier one US data along with opposing risk sentiment drivers has seen volatility in USD grind to a halt. The rate remains range bound between the 97.10–97.68 levels. Looking ahead today, traders will be paying attention to Fed Chair Powell who is due to speak at a community Development conference.

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Euro Muted

EURUSD remains muted this week also with price hugging the underside of the 1.1217 level as the market awaits fresh directional catalysts. Speaking yesterday, Draghi struck a resilient tone saying that the ECB will not admit defeat over inflation. He claimed that rising wage pressures will eventually transmit into higher consumer prices.

Pound Keeps Going Down

GBPUSD remains under pressure again today. This marks its fourth straight day of losses as price continues to retreat following last week’s spike higher in response to the UK local elections. Price is once again testing the lower level of the 1.30–1.33 range. However, with an absence of any key data today, it will likely take tomorrow’s GDP print to fuel either a rebound or a proper break lower.

Risk Sentiment Weak on Trade War Fears

Risk assets have continued their slide lower today with the SPX500 moving below the 2872.76 support. This week, risk sentiment has been rattled by news of the US increasing 10% tariffs on Chinese imports to 25% as of Friday. This is along with the deployment of US warships to the Middle East as tensions between the US and Iran rise. The trade war, which marred world growth last year, has once again been reignited. China has threatened to retaliate if the US presses ahead with the planned tariff increase.

Safe Havens Surge on Weak Risk Appetite

Safe havens have been higher again today, benefitting from the deterioration in risk sentiment. Both gold and the Japanese yen are trading higher against the US dollar. XAUUSD trades 1284.18 last as price remains above the 1280.58 support level. However, for now, price remains capped by the bearish trend line from year to date highs. USDJPY continues to move firmly lower as safe haven inflows favor JPY this week. USDPY is currently testing the 109.74 March low which is a key short term support level.

Crude Declines Halted by Bullish EIA Report

Crude oil prices have been slightly higher today following a bullish report from the EIA yesterday. The weekly industry report showed that US crude stores unexpectedly fell last week by 4 million barrels. Crude prices have had an interesting week due to opposing forces at play. Price was knocked lower initially on the week as Trump announced plans to impose 25% tariff hikes on Chinese goods as of Friday. After that, prices rallied on news that the US is deploying warships to the Middle East in an escalation of tensions with Iran.

Commodity Currencies Mixed

USDCAD has been lower over the European morning today with higher Crude prices keeping CAD supported. For now, price is still above the 1.3469 level which keeps focus on a further test higher. However, with little in the way of key data today moves will likely be limited.

AUDUSD is on the ropes again today with price trading back below the .6982 level. This is the current 2019 closing low. A dovish message from the RBA this week, along with a rate cut by the RBNZ, has bolstered expectations of a forthcoming RBA rate cut. This should further the bearish trend in AUDUSD.

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