Haven flows are helping to underpin the dollar and yen in European morning trade, as risk sentiment turns more sour once again with S&P 500 futures now down about 40 points, or 1.0%, on the day. The dollar was trading lower earlier but has recouped losses to now just be slightly lower against the euro and kiwi, while down 0.5% against the yen with USD/JPY at 137.00.
GBP/USD in particular was trading up around 1.2220 in the handover from Asia but has now fallen quickly to 1.2175 as the attempted upside break this week gets rejected strongly. Here's a look at the technical picture.
Price has now fallen back below the August highs at 1.2276-93 as well as the 50.0 Fib retracement level of the downswing from last year, seen at roughly 1.2306. The weekly chart shows a better depiction of the technical situation:
If you couple that with a more hawkish Fed and more dovish BOE, the fundamentals are working in line with the technicals at the moment and that could spark a big reversal lower in the pair next.
Adding to that of course is the risk selloff, in which the pound tends to be a victim of as of late considering its high beta correlation.
In any case, the dollar is finding some decent footing now on the day as equities come under further pressure - which may look like it will get worse before it gets better.
