Sive Morten
Special Consultant to the FPA
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Good morning,
(Reuters) - The dollar skidded to an eight-week low against the yen on Friday as escalating tensions between the United States and North Korea triggered yet more investor flight to safety.
The dollar last changed hands at 108.96 yen, down 0.2 percent. Trading was thinner than usual, with Japanese markets closed for a public holiday.
Earlier, the dollar slipped as low as 108.91 yen, its weakest level since June 14, when the greenback fell as low as 108.81 yen.
Below that level lies another key technical chart support level for the dollar at 108.13 yen, a trough the U.S. currency k plumbed in mid-April.
"We're getting close towards very important support on the dollar/yen," said Steven Dooley, currency strategist for Western Union Business Solutions in Melbourne.
"Particularly that 108.10/108.00 level, a break below those levels would really set up a rapid move to the downside," he said.
Both the Swiss franc and the yen have climbed against the dollar this week, after U.S. President Donald Trump warned North Korea that it would face "fire and fury" if it threatened the United States.
Trump ratcheted up his rhetoric against North Korea and its leader on Thursday, warning Pyongyang against attacking Guam or U.S. allies after it disclosed plans to fire missiles over Japan to land near the U.S. Pacific territory.
The Swiss franc has gained about 1.3 percent against the dollar so far this week, while the yen has advanced around 1.5 percent in the same period.
The Swiss franc and Japanese yen are often sought in times of geopolitical tension or global financial stress, partly because both countries have big current account surpluses.
Japan is the world's biggest creditor nation and there is an assumption Japanese investors may repatriate their foreign holdings in times of heightened global uncertainty.
Some market participants say the paring of bearish bets against the Japanese yen has probably added to its gains this week.
"Although we're seeing some flight to safe havens, it seems that it's more of a risk consolidation. Profit-taking as opposed to a deeper retreat," said Stephen Innes, head of trading in Asia-Pacific for OANDA in Singapore.
Data from the U.S. Commodity Futures Trading Commission released last week showed that currency speculators still held a large net short position in the yen during the week ended Aug. 1, although somewhat smaller than the levels seen a couple of weeks earlier, when their bearish bets against the yen grew to the largest since January 2014.
Later on Friday, investors will look to U.S. July consumer price data for hints on the Federal Reserve's policy outlook and near-term moves in the dollar.
Subdued U.S. inflation has stirred doubts about the chances of another Fed interest rate hike this year, which have weighed on the dollar.
The euro held steady at $1.1776. Against the yen, the euro last traded at 128.29 yen, down 0.2 percent. The euro touched a one-month low of 128.19 yen earlier on Friday.
So, our yesterday EUR setup has been completed nicely as AB-CD pattern has reached its target. Today, guys, we will take a look at a bit broader setup on CHF. We quite rare take a look at this currency, but as new spiral of geopolitical turmoil has started - it comes again at first stage, as well as JPY...
On CHF price is forming clear reverse H&S pattern. And now we stand at stage of right shoulder forming. It means that we should keep an eye on bullish reversal patterns on intraday chart. Yes, gepolicy is major driving factor right now and if tensions around N. Korea will escalate - H&S will probably fail. but right now it looks nice and is worthy of our attention.
In process of H&S forming franc has formed bullish reversal swing. It means that right shoulder retracement probably should be deep:
On 4-hour chart we have some important signs. First of all - pay attention to pace of dropping. It's really fast, while retracement is very small. At the same time drop has less amount of candles than retracement. This suggests significant selling power on market right now. Despite that franc stands at support - MPP and 50% Fib level, it has not hit yet even minor 0.618 AB-CD target and it means that downside action should continue a bit more.
The nearest level where market could stop is 5/8 Fib support around 0.9550-0.9565. There is AB-CD target, Fib level, some Fib extensions... Besides, now we do not have yet any patterns, but we need them to get confidence of upside reversal.
Target of this pattern will be AB-CD that is based on head and shoulder. It's target stands around 0.99 area. Thus, trade should have 300 pips potential...
(Reuters) - The dollar skidded to an eight-week low against the yen on Friday as escalating tensions between the United States and North Korea triggered yet more investor flight to safety.
The dollar last changed hands at 108.96 yen, down 0.2 percent. Trading was thinner than usual, with Japanese markets closed for a public holiday.
Earlier, the dollar slipped as low as 108.91 yen, its weakest level since June 14, when the greenback fell as low as 108.81 yen.
Below that level lies another key technical chart support level for the dollar at 108.13 yen, a trough the U.S. currency k plumbed in mid-April.
"We're getting close towards very important support on the dollar/yen," said Steven Dooley, currency strategist for Western Union Business Solutions in Melbourne.
"Particularly that 108.10/108.00 level, a break below those levels would really set up a rapid move to the downside," he said.
Both the Swiss franc and the yen have climbed against the dollar this week, after U.S. President Donald Trump warned North Korea that it would face "fire and fury" if it threatened the United States.
Trump ratcheted up his rhetoric against North Korea and its leader on Thursday, warning Pyongyang against attacking Guam or U.S. allies after it disclosed plans to fire missiles over Japan to land near the U.S. Pacific territory.
The Swiss franc has gained about 1.3 percent against the dollar so far this week, while the yen has advanced around 1.5 percent in the same period.
The Swiss franc and Japanese yen are often sought in times of geopolitical tension or global financial stress, partly because both countries have big current account surpluses.
Japan is the world's biggest creditor nation and there is an assumption Japanese investors may repatriate their foreign holdings in times of heightened global uncertainty.
Some market participants say the paring of bearish bets against the Japanese yen has probably added to its gains this week.
"Although we're seeing some flight to safe havens, it seems that it's more of a risk consolidation. Profit-taking as opposed to a deeper retreat," said Stephen Innes, head of trading in Asia-Pacific for OANDA in Singapore.
Data from the U.S. Commodity Futures Trading Commission released last week showed that currency speculators still held a large net short position in the yen during the week ended Aug. 1, although somewhat smaller than the levels seen a couple of weeks earlier, when their bearish bets against the yen grew to the largest since January 2014.
Later on Friday, investors will look to U.S. July consumer price data for hints on the Federal Reserve's policy outlook and near-term moves in the dollar.
Subdued U.S. inflation has stirred doubts about the chances of another Fed interest rate hike this year, which have weighed on the dollar.
The euro held steady at $1.1776. Against the yen, the euro last traded at 128.29 yen, down 0.2 percent. The euro touched a one-month low of 128.19 yen earlier on Friday.
So, our yesterday EUR setup has been completed nicely as AB-CD pattern has reached its target. Today, guys, we will take a look at a bit broader setup on CHF. We quite rare take a look at this currency, but as new spiral of geopolitical turmoil has started - it comes again at first stage, as well as JPY...
On CHF price is forming clear reverse H&S pattern. And now we stand at stage of right shoulder forming. It means that we should keep an eye on bullish reversal patterns on intraday chart. Yes, gepolicy is major driving factor right now and if tensions around N. Korea will escalate - H&S will probably fail. but right now it looks nice and is worthy of our attention.
In process of H&S forming franc has formed bullish reversal swing. It means that right shoulder retracement probably should be deep:
On 4-hour chart we have some important signs. First of all - pay attention to pace of dropping. It's really fast, while retracement is very small. At the same time drop has less amount of candles than retracement. This suggests significant selling power on market right now. Despite that franc stands at support - MPP and 50% Fib level, it has not hit yet even minor 0.618 AB-CD target and it means that downside action should continue a bit more.
The nearest level where market could stop is 5/8 Fib support around 0.9550-0.9565. There is AB-CD target, Fib level, some Fib extensions... Besides, now we do not have yet any patterns, but we need them to get confidence of upside reversal.
Target of this pattern will be AB-CD that is based on head and shoulder. It's target stands around 0.99 area. Thus, trade should have 300 pips potential...
