Sterling took the spotlight on Tuesday as Brexit worries came back to haunt the pound in losses compounded by intensifying global safe-haven flows -- due to tumbling equities -- that favored the dollar and yen.
The euro, seen somewhat as a funding currencies, fell much less by comparison, with investors viewing a potentially chaotic Brexit if EU-UK negotiations break down as less damaging for the trading bloc, allowing EUR/GBP to rally roughly 1%.
Sterling fell furthest against the yen nL1N2G519L, nearing significant support, including its uptrend line from March’s pandemic-plunge low.
GBP/USD broke the 38.2% Fibo of the June-September rise at 1.3012 by August’s 1.2982 low, with negative BoE rates being priced in for next year.
Sterling rallied for months, disregarding unproductive EU-UK trade talks, but an October deadline to reach a new trade deal is approaching nL8N2G50O0.
The heavily speculative nature of EUR/USD’s uptrend since June is now weighing on it, since it has been positively correlated with surging U.S. equities, which have now gone into retreat.
EUR/USD broke last week’s low, ending a streak of 10 successively higher weekly lows.
The 1.17625 low on EBS from two weeks ago is now the weekly on-close pivot point.
A weekly close below 1.1762, after Thursday’s ECB meeting that many expect to signal unease with the euro’s strength and deflation threat, would open the door to August’s 1.1695 low by the 38.2% Fibo of the June-September uptrend at 1.1691 and the daily cloud top nearby starting Friday.
Risk-off repatriation flows into the yen took USD/JPY below the preceding three days’ lows at or just above 106, as well as the daily tankan and kijun at 106.07.
Yen gains against the dollar, and more so against non-havens and high-beta currencies, will intensify if the S&P 500 falls below its 50-day moving average support at 3,305.
Key USD/JPY support comes at 105.10/20 August lows.
EUR/JPY tumbled below its uptrend from May, with August’s low and 38.2% of the June-September rise at 124.10 in its sights next.
Aussie clung to 30-DMA support at 0.7217 as USD/CNY continued its rebound away from 200-week moving average support.
Commodity currencies were hard-hit by oil's steep fall.
Copper and silver fell while gold held firm.
This week's main U.S. data, Thursday's jobless claims, will probably be overshadowed by the ECB meeting that morning.
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