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Traders flood to safe haven assets

Traders flood to safe haven assets, selling equities and buying bonds as geo-political concerns cause strong risk aversion.

Russian 100 ruble banknotes and 25 ruble coins
Source: Bloomberg

USDRUB

We saw a 2% fall in the Russian ruble yesterday after new sanctions were imposed on Russian companies.

Effectively a number of Russia’s larger corporates will be shut out of the US wholesale markets, thus their cost of doing business is likely to increase.

The Malaysia Airlines plane crash will now put pressure on Europe to also impose much harsher sanctions and potentially restrict Russian companies from accessing Europe’s capital markets. Expect heavy selling when the cross opens at 16:00.

CHFJPY

Short CHF/JPY positions are my preferred way to hedge portfolios against increased volatility. Technically the pair broke through strong horizontal support at 113, which has been a floor since mid-May. The hourly chart is oversold, so I would personally wait for a slight move higher from here to 112.90 before entering shorts. I feel pacing stops on shorts from here at 114.30 would be prudent and would look for a move to the February low of 111.69.

AUDNZD

My long AUD/NZD idea at 1.0667 on July 10 continues to push higher and I continue to focus on the 1.0850 area as a short-term target. Traders will also be eyeing a move to the 200-day moving average at 1.0890. Next week’s Australian Q2 CPI print is likely to be an AUD positive in my opinion and while I expect the RBNZ to hike interest rates next week, I feel it will give a strong indication that it will pause in its rate hike cycle.

US 500 cash (S&P 500)

The bears will have seen the US benchmark break and close through the April 14 uptrend, while the index has also closed through the 21-day moving average. The RSI’s have also broken below 50, highlighting the weakness in price. Key support is now seen at 1900 area, which was the ceiling on the market through April and May.

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