Trading remains thin on Easter Monday. While more markets are open in comparison to Good Friday, volume remains low. This does not prevent the markets from moving, and it is against the US dollar, which was previously hit by Trump.
There are several geopolitical tensions that can explain the rise of the safe-haven Japanese yen, but why are the euro and the pound rising? The “contagion” could be a result of the low level of liquidity.
North Korea, Turkey, Syria
- Tensions around North Korea continue as US Vice President visited South Korea and vowed to stand firm against aggressions from the North. Earlier, there were reports about a failed missile test by Pyongyang. China canceled flights between Beijing and Pyongyang. A delusion of these tensions might be in the works in the background, but we have no evidence about it.
- Turkey: The highly anticipated referendum ended in a narrow victory for President Erdogan, 51.3% in favor of the widespread constitutional changes. Nevertheless, there were complaints about voting irregularities that dampen the legitimacy of the regime. Turkey is the bridge for many refugees fleeing Syria to Europe and quite a large developed economy.
- Syria: Nothing has been resolved in the war-torn country after the Assad regime bombarded his people with chemical weapons and the US retaliated with Tomahawk missiles. A meeting between US Secretary of State Tillerson and his Russian counterpart Lavrov was not fruitful.
USD/JPY, EUR/USD, GBP/USD
USD/PY is down below the previous level of support at 108.65 and has already reached a low of 108.13. It seems that the Japanese authorities can do little to alleviate the inflows.
The next line of support is only at 107.50.
EUR/USD made a sharp move to 1.0650 but could not hold onto this higher ground. Nevertheless, it is up some 30 pips on the day.
Further resistance awaits at 1.0660, followed by 1.0720. Support is at 1.0590.
GBP/USD is settling well above 1.25, trading at 1.2540 at the time of writing.
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