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BUZZ-COMMENT-US recap: EUR/USD falls as risk aversion favors haven dollar, yen

Credit: REUTERS/Dado Ruvic

The dollar and yen rose against the euro and other currencies as risk aversion over European pandemic restrictions [nL1N2HJ0QL][nL8N2HJ0OH] and U.S. political uncertainty spurred investors to seek safe havens.

Oct 28 (Reuters) - The dollar and yen rose against the euro and other currencies as risk aversion over European pandemic restrictions and U.S. political uncertainty spurred investors to seek safe havens.

U.S. election concerns, including the potential for a contested result , meant the outlook for COVID-19 relief remained uncertain after recent talks failed to produce a bill .

Falling stocks and widening euro zone core-peripheral government bond yield spreads took EUR/USD down to 1.1718 from its open and session high at 1.1799 on EBS. For the fourth time in as many weeks, EUR/USD found support near 1.17.

A close below October's 1.1685 low by Thursday's daily cloud base, particularly after Thursday's ECB meeting, could shake out more of the dominant speculative long community.

German plans to increase deficit spending next year to meet mounting economic challenges provided some relief.

Sterling spiked down to 1.2918, its lowest since Oct. 20, fleetingly breaching the 50% Fibo of the September-October recovery at 1.2927 , but then recovered past 1.3000, averting a bearish close below 1.2927.

With the Brexit-deal clock ticking down, markets suspect negotiators will avoid a chaotic no-deal split.

The haven yen overpowered the dollar early on, nearly reaching September's 104 EBS nadir, but broader safe-haven buying of the U.S. currency interrupted that slide . The bounce to 104.45 was capped below the broken 76.4% Fibo at 104.50 finally closed below on Tuesday, so USD/JPY bulls remain in jeopardy.

Yen haven demand and high-beta currency selling sent AUD/JPY tumbling below September's lows by twin Fibos, putting the mid-June swing low at 72.51 in play .

The S&P 500, to which AUD/JPY and most yen crosses are positively correlated, broke the 100-day moving average support that had caught its September slide.

AUD/USD flirted with a break of October and September lows after the downtrend line from September's high rejected its earlier advance .

The Dow broke below its 100-DMA but found support by September's 26,537 setback low. That appears pivotal for risk, as a breakdown below there would signal that the U.S. equity market's failure in October to surpass September's record high was a warning of a bigger correction.

Commodity prices and commodity-linked and emerging market currencies were clobbered.

Thursday brings BOJ and ECB meetings, which are expected to keep current policies unchanged but also provide dovish forward guidance.

Also up are U.S. Q3 GDP and jobless claims.

For more click on FXBUZ

(Editing by Burton Frierson Randolph Donney is a Reuters market analyst. The views expressed are his own.)

((Randolph.donney@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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