Currency war fears force investors into safe haven asset classes
Financial markets moved into full risk-off trading mode this week as China retaliated to the latest round of US trade tariffs by weakening the Chinese yuan currency. The Trump administration reacted by officially calling out China for currency manipulation. Fears of a full-blown currency war between the world’s two largest economies caused traders to sell stocks and seek the safe haven of the Japanese yen and Swiss franc currencies. Global bond markets also saw unprecedented levels of volatility, prompting negative yields in longer-dated bonds in Germany and Japan.
∙ The USDJPY pair is bearish while trading below the 107.00 level, key support is found at the 105.40 and 105.00 levels.
∙ If the USDJPY pair trades above the 107.00 level, buyers may test towards the 107.30 and 107.50 resistance levels.
The New Zealand dollar fell sharply lower against a basket of top-tier currencies this week after the Reserve Bank of New Zealand slashed interest rates by fifty basis points. The dramatic rate cut took financial markets by surprise and caused the NZDUSD pair to plummet below the 0.6400 level. The RBNZ policy statement was heavily bearish, as the central bank Governor Adrian Orr noted that the nations interest rate could head to zero. The Australian dollar also dropped after the RBNZ policy decision, as investors feared the RBA may follow the New Zealand central bank and cut rates even further.
∙ The NZDUSD pair is bearish while trading below the 0.6500 level, key support is found at the 0.6400 and 0.6358 levels.
∙ If the NZDUSD pair trades above the 0.6500 level, buyers may test towards the 0.6540 and 0.6580 resistance levels.
Bitcoin opened the trading week sharply higher, hitting $12,300, as the first cryptocurrency gained close to fifteen percent in under one-week. Bitcoin received a strong bid, as investors speculated that the cryptocurrency is fast becoming a safe-haven asset class in times of uncertainty. Bitcoin easily outpaced its nearest rivals, as the broader cryptocurrency market suffered a torrid week of trading action. Litecoin suffered heavy losses below the $100.00 level, while Ethereum failed to attract buying interest above the $240.0 resistance level.
∙ The BTCUSD pair is only bullish while trading above the $11,100 level, key resistance is found at the $12,300 and $13,000 levels.
∙ If the BTCUSD pair trades below the $11,100 level, key support is located at the $10,600 and $10,000 levels.
The price of gold soared in value this week, as risk-off trading sentiment caused traders to seek the safe-haven of the yellow metal. Gold broke above the $1,500 level for the first time in six-years, as geopolitical and economic concerns prompted a major technical breakout. Silver also moved above the $17.00 resistance level, as the popular metal moved in lock-step with gold prices. Gold faces limited technical resistance above the $1,525 level, leaving the road open to further gains towards the $1,600 level and possibly even $1,700 level.
∙ XAUUSD is only bullish while trading above the $1,450 level, key resistance is found at the $1,525 and $1,550 levels.
∙ If XAUSUD trades below the $1,450 level, key support is located at the $1,440 and $1,420 levels.