Forex EUR/USD Daily Video, August 05, 2024

[Sive Morten]

Good morning,

Our next upside target on EUR stands around 1.0975-1.1026 area. Context remains bullish, so we intend to watch for the pullback to buy, suggesting that 1.0860 area is descent enough to start with.

 

[Ugyen Penjore]

Thanks Sive sir, will the level 1.077 from where upward trend started be tested incase USD strengthens due to risk-off scenario in next week?

 

[Sive Morten]

Thanks Sive sir, will the level 1.077 from where upward trend started be tested incase USD strengthens due to risk-off scenario in next week?

Well, it probably will be too much, the crash of all bullish hopes.
And risk-off normally assumes dollar weakness, because demand for USD is raising when problems stand around. Everybody are buying USD- nominated assets, such as US Treasuries, and they need more USD.
Conversely, in risk-off, theoretically demand for USD should decrease.

 

[Ugyen Penjore]

Thank you Sive Sir, so that means in risk-off market, usd demand is more so its demand is more? Current market is risk-off too but since it is due to US economy weakness as proven by weak economic data, USD demand is low but yen is more?

 

[Sive Morten]

Thank you Sive Sir, so that means in risk-off market, usd demand is more so its demand is more? Current market is risk-off too but since it is due to US economy weakness as proven by weak economic data, USD demand is low but yen is more?

Now it is a big mess of different circumstances that coincided in a moment. Yen has its own driving factors - in fact this is big short coverage of carry trade positions due to recent BoJ rate change and promising to tight liquidity. the scale of yen strength has no direct relation to the US data, although it also adds fuel to the fire.
Dollar has dropped because of the Fed now stands in a trap. They will have to cut rate significantly, at least 50 points in September, but recent data makes investors worry that situation will worsen much faster. It reflects raising market expectations of recessions. This is not risk-off action.

Risk off I see in US bonds and gold, where, as we said in report, some signs of relief appearing. It might be temporal or not, but it accurately follows to the mood of recent geopolitical news.

All these stuff looks like crazy mix. Bitcoin is a different story as well. People start selling it as a most risky asset, to get cash and plug the holes on margin and balances for other assets.

Now the major question is how long this mess will last. Will it be just early minor shakes or total earthquake.

 

[Ugyen Penjore]

Thank you Sive sir, for clarifying my doubts.