While some of the buying momentum towards the Japanese Yen is slowing down as trading gets underway on Wednesday, the Japanese currency remains the choice of traders who are continuously looking for the comfort of the Yen as a safe-haven asset. There are a number of different reasons why the Yen continues to be the best friend of an investor with the main one being the external environment that is still hurting investor sentiment towards riskier assets. While other factors such as the resumption of selling in oil after the commodity re-entered another bear market is likely to at some point weigh on equities and provide the Yen with even further momentum.
Some of the risk-off attitude in the atmosphere has also taken a bite out of the momentum towards the Dollar, meaning currencies are generally advancing against the Dollar and this should also provide some relief to emerging market assets. US interest rate expectations have also resumed their general rounds of being pushed back by the markets, which also provides some validity behind why the Dollar is gradually falling lower down the charts. As always, we seem to be going on around endless roundabouts when it comes to providing consistency over both whether, and when the Federal Reserve could possibly raise US interest rates in 2016.
The recent depreciation in the value of the Dollar has provided Gold with the platform to return back towards levels not seen since the post-Brexit uncertainty above $1350. I personally believe that Gold still has further upward appreciation potential before the end of 2016 and there are a variety of different reasons for this. Firstly, returned depression in the oil markets should at some point weigh on equity markets. Secondly, while the Federal Reserve are maintaining a bias towards raising US interest rates higher on the outside there is still a lack of confidence over whether US interest rates could really be raised in 2016. On top of this, concerns over the growth of the global economy are gaining endless headline attention and I think this could consider longer-term investors towards Gold as an alternative investment.
When speaking about currencies gaining momentum against the Dollar, the Eurodollar has definitely been up there as one of the winners after the pair bounced from 1.09 to 1.12 over the previous couple of trading sessions. This is what we generally find with the Eurodollar and constantly mention that the majority of gains for the Euro are limited to Dollar weakness. From a fundamental perspective, there is no real news out there to create new-found optimism over the EU economy and this means that we are likely to find sellers attempting to enter positions after the pair tested exhaustion following the bounce over the past couple of days.
Despite of all the continuous headlines and economic data regularly pointing out that the unexpected EU referendum outcome is going to lead to a sharp downturn for the UK economy, the British Pound is also benefiting from the Dollar weakness with the GBPUSD climbing towards its highest level in around two weeks around 1.3365 over the previous 24 hours. To be honest with you, this is largely a technical bounce away from the major support zone at 1.3050 that we mentioned around one week ago. With so many economic indicators continuing to focus on the negative attention and impact on the UK economy following the unexpected EU referendum, momentum for the GBPUSD over the medium and longer-term still appears in favour of sellers.