- EUR/USD drops as the US dollar finds haven demand on escalating US-China tensions.
- China's plan to impose a controversial security law on Hong Kong draws Washington's ire.
- The US proposal to sell arms to Taiwan irks China.
EUR/USD is feeling the pull of gravity on Friday with the American dollar drawing haven bids amid fears that China's decision to impose new Hong Kong security law would lead to major US-China tussle.
The currency pair is trading near 1.0935 at press time, representing a 0.13% drop on the day, having faced rejection at 1.10 on Thursday. That was the pair's second failure to topple the 1.10 resistance of the ongoing month.
Risk-off
Major Asian equity market indices are flashing red with Hong Kong's Hang Seng index reporting a 4% decline. Meanwhile, oil prices are down by over 6%.
Investors are shunning risk seemingly due to China's proposal to rein in dissent by writing a new law into Hong Kong's charter. The new law would ban secession, foreign interference, terrorism, and external interference aimed at toppling the central government.
Washington has already issued a stern warning that it would react very strongly if Beijing attempts to gain more control over the former British colony.
As a result, investors are worried about the prospects of a full-blown cold war between the US and China. The two nations are already at loggerheads over the origin of the coronavirus and China's handling of the virus outbreak. Also, the US proposal to sell arms to Taiwan has irked China. This is because Beijing does not recognize China as an independent nation.
With geopolitical tensions escalating, the US dollar, a global reserve, is likely to remain better bid while heading into the weekend.
On the data front, the minutes of the European Central Bank's (ECB) monetary policy meeting is scheduled for release at 11:30 GMT. The pair may also take cues from the ECB policymaker Lane's speech at 14:30 GMT.
Technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Geopolitics once again take centre stage, as UK Retail Sales wither
Nearly a week to the day when Iran sent drones and missiles into Israel, Israel has retaliated and sent a missile into Iran. The initial reports caused a large uptick in the oil price.