Risk Aversion Returns To The Market

Traders saw a strong sell-off on Monday which led in many indices to a slump towards psychological support zones such as the 15000 level in the DAX. The index fell to the lowest level since May as investors rushed into safe haven assets as sentiment soured. A bout of risk aversion returned to the summer markets amid renewed fears over an economic slowdown, driven by a resurgence in Covid cases.

DAX

The index did not stop its fall until nearly 15000. Buying the dip could lead to some rebound towards 15500 now.

As for the currencies, the biggest beneficiaries of haven demand were the U.S. dollar and Japanese Yen. The GBP/USD dropped towards the descending trendline of its recent downward channel near 1.3650. If now 1.3630 holds, we may see a small rebound towards 1.3750.

The EUR/USD was the only currency pair that ended the trading day virtually unchanged. We keep tabs on technical breaks below 1.1730 and 1.17 on the downside and 1.1850 on the upside.

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