The US dollar edged up against its main competitors on Thursday after fears of escalating Sino-American trade war have increased, prompting investors to shelter their assets in safe havens, including government bonds.
As the dispute between the two largest world economies showed no signs of improvement, the worries that global growth would be affected were rising in recent trading sessions, with more risky assets taking over the burden of sales.
The greenback has managed well to leave behind poor prints from the docket during last week, which have reignited concerns that a technical recession could develop at some point in 2020.
The US Dollar Index was relatively calm, stalling at 98.128 points, moving down from the two-year high of 98.371 points reached a week ago. The greenback is extending the weekly recovery for another session, managing to reclaim the 98.00 mark and above, clinching at the same time fresh multi-day highs. The index grew by more than 2% since the beginning of the year.
Looking at the broader picture, the constructive stance on the US Dollar Index remains unchanged while above the key 200-day SMA at 96.43 and the 8-month support line at 96.33.
The US dollar also remained stable after falling yields on 10-year US government bonds, which reached 2.210% at night, the lowest level since mid-September 2017. The status of the US currency as a safe haven has the potential to attract more offers during market turbulence and political tensions. The 10-year bond yields in the US reached 2.267% two days ago.
The EUR/USD currency pair is consolidating the losses amid dual trade tensions. It is fluctuating below 1.1150, at the lows, at the time of writing trading at 1.1135.
The US dollar was backed by the weak Euro because of new signs of political tension between Italy and the European Union. The European Commission on Wednesday asked the Italian government to explain the worsening public finances of the country, which is the basis for a possible legal clash with the Euro-skeptic coalition in Rome.
The slowdown which has gripped the Eurozone has also dampened growth in Germany, but the labor market has performed well and remained a bright spot. However, there was negative news in April, as unemployment rolls ballooned by 60,000 in May, surprising the markets.
EUR/USD has suffered from downside momentum and refusing to abate. The Relative Strength Index is just above 30 – currently out of oversold conditions.
Support awaits at the day’s low of 1.1123. The next shock absorber is critical – 1.1107, which was the lowest point this year and since 2017. Further down, 1.1025 and 1.0970 are eyed.
Some resistance is at today’s low of 1.1145. It is then followed by 1.1190 which was a swing high last week. Next up, we find 1.1220 which was this week’s peak.
The USD/JPY pair managed to add some ground, up on a weekly basis, recovering up to 109.74, now trading a few pips below this last.
The advance came alongside a bounce in US Treasury yields, still sharply down for the week, with the benchmark yield for the 10-year note currently at 2.26% after bottoming Wednesday at 2.21%. Equities, on the other hand, aren’t providing positive clues, as Asian indexes stay in the red, while European ones are posting modest gains, although several Union’s countries celebrate a holiday today, with most markets closed.
The pair trades just above the 61.8% Fibo retracement of its latest bullish run, lacking enough momentum to confirm a bullish continuation, as the technical indicators turned flat within neutral levels. In the same chart, the 100 SMA caps the upside with a mild bearish slope, while the 20 SMA attempts to advance below the current level. At this point, the USD/JPY pair would need to surpass the 109.90 to turn short-term positive and be able to extend its gains, while renewed selling interest that sends the price below 109.50, will probably signal bears retain the lead, anticipating losses for the upcoming sessions.
The main supports levels for USD/JPY pair are 109.50, followed by 109.00 and 108.65, while the resistance levels are 109.90, followed by 110.20 and 110.60.