News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bullish
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Mixed
Gold
Mixed
GBP/USD
Bearish
USD/JPY
Bearish
More View more
Real Time News
  • Traders focus a lot of their energy on spotting the perfect time to enter a trade. While this is important, it is ultimately where traders choose to exit trades that will determine success. Learn about the three types of trading exit strategies here: https://t.co/muYkTNXH7s https://t.co/i70XLrni1w
  • Trading bias allows traders to make informative decisions when dealing in the market. This relates to both novice and experienced traders alike. Start learning how you may be able to make more informed decisions here: https://t.co/rz7fqhRoMG https://t.co/Zl7sfu0OT2
  • What suits your style of trading stocks or commodities? Find out what are the differences in these two markets here: https://t.co/BnA07cMV0s https://t.co/QqlZ2dQgVv
  • Forex quotes reflect the price of different currencies at any point in time. Since a trader’s profit or loss is determined by movements in price, it is essential to develop a sound understanding of how to read currency pairs. Learn how to read quotes here: https://t.co/CNtqrKWDBY https://t.co/lvIUu5FHoq
  • The non-farm payroll (NFP) figure is a key economic indicator for the United States economy. It is also referred to as the monthly market mover. Find out why it has been given this nickname here: https://t.co/yOUVEEqhc5 https://t.co/bpKdIqGxsn
  • Looking for a new way to trade reversals? One of the most used reversal candle patterns is known as the Harami. Like most candlestick formation patterns, the Harami tells a story about sentiment in the market. Get better with trading reversals here: https://t.co/rfwUWJfbz9 https://t.co/jmcAIW4w5k
  • It’s important for traders to be familiar with FX spreads as they are the primary cost of trading currencies. Understand a pair's spread here: https://t.co/zEEUHZBx7g https://t.co/M9isuvnzqF
  • The British Pound is giving back some of its multi-month gains with some pairs testing notable support despite a positive fundamental backdrop. Get your market update from @nickcawley1 here: https://t.co/6Ct5R0H41F https://t.co/c4rXmMjMrv
  • Dealing with the fear of missing out – or FOMO – is a highly valuable skill for traders. Not only can FOMO have a negative emotional impact, it can cloud judgment and overshadow logic. Learn how you can control FOMO in your trading here: https://t.co/lgDf5cVYOn https://t.co/4dhCP5pnxM
  • Gold is facing the neckline of a Double Bottom Pattern after bouncing off a confirmed longer-term trendline. Is a bullish reversal in order? Get your market update from @FxWestwater here: https://t.co/kLXZewWBMd https://t.co/w1Nu0z569m
Evaluating Dollar, Yen, Franc and Gold as Havens Amid Fear

Evaluating Dollar, Yen, Franc and Gold as Havens Amid Fear

John Kicklighter, Chief Strategist

Talking Points:

  • A shock of risk aversion closed out this past week as markets grew concerned over the global exposure to Turkey amid its pressure
  • In a panic, the saying is 'all correlations go to 1 or -1'; but in reality, risk aversion and havens are not so consistent
  • We discuss the collective and unique appeals - as well as the shortcomings - of the Dollar, Yen, Swiss Franc and Gold under risk

What makes for a 'great' trader? Strategy is important but there are many ways we can analyze to good trades. The most important limitations and advances are found in our own psychology. Download the DailyFX Building Confidence in Trading and Traits of Successful Traders guides to learn how to set your course from the beginning.

An Abrupt - But Unproven - Risk Aversion

What did we witness this past week? There was an unmistakable tumble across the financial system in assets with a 'risk' designation. The variety of 'havens' similarly rose. This abruptness of this move contradicted the steady deterioration of market activity over the preceding days and weeks. Despite the proliferation of tangible threats from trade wars to fading growth forecasts to normalizing monetary policy that was foundation to a decade of speculative recovery; the markets refused to cow to logical concerns. And along came the US sanctions on Turkey. The world's 17th largest economy in the world was already under pressure as the local currency - the Lira - was sliding versus its US counterpart. When the Trump administration announced sanctions against two government ministers last week, the terse rhetoric between the US leader and Turkish President Erdogan started to charge the exchange rate. This was not particularly new as we have also seen pressure exerted on Iran and Russia recently. Yet, the market's sensitivity was amplified Friday when Trump announced the tariffs on imported Turkish steel and aluminum would be doubled. USDTRY rose another 16 percent through the final trading day of the week, and the world started to assess its exposure to Turkish markets. From fellow emerging markets to European banks to carry currencies, the pain was distributed through the market.

Rolling 12-Month Performance of Majors Sectors

The US Dollar's Key Appeal and Prominent Shortcomings

With the broad slide in risk-related markets through the end of the week, few were surprised to see the US Dollar rally in the capital shift. I count myself among those caught off guard. Not only was it remarkable that a charge of volatility was set off in the midst of a summer lull that managed to downplay multiple high-profile concerns, but the Greenback's growing 'list of defects have started to spread to the mainstream. Nonetheless, the benchmark currency led a charge that leveraged a bullish break to multi-month highs whether we reference the DXY trade-weighted index or equally-weighted measures. From EURUSD, the session's drama translated into a clear break of a 'head-and-shoulders' neckline. Moving forward, the Dollar will retain its role and climb further if the iron is kept to the speculative fire. In liquidity terms, there is no peer to the USD and its underlying Treasuries and Money Markets. However, what if the unwind in sentiment happens at a more controlled burn rate? It will give market participants room to consider how suitable the currency is for such a role when it is at the center of the trade wars and sanctions these past months. Further, President Trump has openly weighed in on the level of the currency, stating interest in seeing it retreat. In a panic, investors will group through the smoke to find the US markets. Absent that extreme, expect the currency to start to falter under such intense scrutiny.

Daily DeailyFX DXY Index Chart

Alternative Havens: Yen, Franc and Gold

Given the caveats to the Dollar's appeal, it is worthwhile to consider alternative harbors for capital should stability be evaluated on the basis of how many economic penalties a country is pursuing. Through Friday, the Dollar managed to gain against most of its major and minor crosses. There was one likely exception however in the USDJPY. The pair slid, which was not surprising given the pain felt by the Japanese currency across the market. JPY is often referred to as a safe haven, but that is not exactly accurate. Capital is not redirected far and wide to seek shelter in Japanese financial markets. Rather this is a currency correlated to risk trends as the Yen is a renowned funding when the speculative build up is underway. When fear kicks in, the first thing you do before seeking out havens is to cut long risk trades like these low handing carries. The question for this currencies suitability for further risk aversion is the lack of carry trade build up we have seen in recent years and the pressure this places on the ineffectual Bank of Japan. As for the Swiss Franc, most FX traders have made an effort to black this currency out of their mind since January 2015. That is fair, but this is currency represents a long-standing safe haven with the added benefit political backdrop where the government is purposely neutral. If trade wars and sanctions continue to drive fear forward, this would be an appealing currency. Yet, everything considered, there are no better candidates for full-tilt speculative unwind than gold. Recently driven lower by a stubborn rise for the Dollar and speculative benchmarks like the S&P 500, this metal still harbors the best potential for hosting panicked investors in the future. In risk aversion, the complications of trade wars, sanctions, currency wars, normalizing monetary policy and more will plague many markets. It would however present a strong benefit for the metal. We discuss havens as risk trends start to rock in this weekend Quick Take Video.

Daily Chart of Equally-Weighted Yen Index

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES