Will traditional safe havens - Gold & JPY- continue to fly high in Europe?
|The traditional safe haven assets like Gold & Treasuries and funding currencies like Yen traded on a positive note in the Asian session.
Gold ran into the key trend line hurdle
The yellow metal breached the 200-DMA hurdle in NY session yesterday and ran into a critical resistance at $1277 (resistance offered by the trend line drawn from 2011 high and 2012 low).
USD/JPY dropped to 5-month low
USD/JPY hit a 5-month low of 109.34 in Asia on risk aversion. The wires also blamed the drop to stops being triggered on positional longs in the Dollar-Yen pair.
Geopolitics remains at the center stage
US-Russia military conflict over Syria is looking more and more likely. As per the latest reports, US accused Russia of cover-up in Syria chemical attack and asked Russia to abandon Syria’s President Bashar al-Assad.
Meanwhile, North Korea warned of a nuclear attack on the United States at any sign of American aggression as a US Navy strike group steamed toward the western Pacific. President Trump tweeted that North Korea was "looking for trouble" and the United States would "solve the problem" with or without Beijing's help.
Clearly the geopolitical risks are rising each passing day. Furthermore, caution ahead of the French elections could also keep the risky assets on the back foot.
Other factors working in favor of haven assets
Iron ore fell for the fourth consecutive session and dropped to the lowest price since November. This is likely to weigh over the mining stocks across Europe and add to the risk-off tone. Another factor that could work in favor of the haven assets is the drop in the Chinese PPI and the resulting speculation that reflation trade is running out of steam.
The overall situation indicates the haven assets - Gold, Yen and Treasuries are likely to remain well bid in Europe. Technical corrections could be short lived. German Bunds may strengthen as well.
Watch out for a sustained break in gold prices above the key descending trend line drawn from 2011 high and 2012 low. Meanwhile, the Dollar-Yen is more likely to hold below the monthly 50-MA level of 109.59.
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