Euro bears may need to turn to havens amid dollar rebalancing

A bearish view on the euro following the European Central Bank’s latest easing signal may be better expressed through haven currencies than the dollar, even as the yen and the Swiss franc trade near cycle highs.The common currency looks relatively supported against the greenback, which remains vulnerable to losses after the Federal Reserve signalled an imminent interest-rate cut. It has less defence against the yen and the franc, amid bets the ECB will move first to cut rates even as the Japanese and Swiss central banks stay dovish. Comments by Klaas Knot, one of the hawkish Governing Council members, suggest policy loosening is a question of when and not if.Position rebalancing in the dollar is hefty following the latest Federal Reserve policy statement and chances are that it may not end in the coming sessions as real-money names and macro accounts look to short the greenback afresh, according to traders in Europe who asked not to be identified because they are not authorised to speak publicly.This makes euro-dollar trading risky on policy bets at a time when ongoing trade concerns and Brexit uncertainty make case for haven longs.The euro may remain supported versus the dollar until the ECB actually pulls the trigger on policy easing, or until Fed rate cuts are no longer seen as precautionary moves but as a necessity to climb out of recession, a point in time where the greenback may regain ground as a reserve currency. Still, trade and geopolitical concerns are likely to keep safety demand strong versus the euro. Focus now lies on the Group-of-10 summit on June 28-29 where US President Donald Trump is expected to meet with Chinese President Xi Jinping. A breakdown of trade talks would spark another haven rally as Trump-related uncertainty stays strong, with the latest example being a military strike on Iran that was ordered by the US president before being called off.In the short term, charts suggest that the dollar may be in for another round of strong selling as the Bloomberg Dollar Spot Index touches its lowest in three months and support from a year-long trendline seems to finally give in.What to watch: Group of 20 summit in Osaka, Japan on June 28-29; President Trump and Chinese President Xi Jinping will meet on the sidelines to resume trade negotiations that broke down in May Bank of England governor Mark Carney testifies before Parliament’s Treasury Committee on the May inflation report on Wednesday, June 26.Policy makers’ speeches include Fed chair Jerome Powell, New York Fed President John Williams, Atlanta Fed President Raphael Bostic, St Louis Fed President James Bullard, ECB Governing Council member Ewald Nowotny, Reserve Bank of Australia Governor Philip Lowe Economic releases include euro area inflation; US GDP, personal spending, PCE deflator; UK GDP; and Norway unemployment.The Fed releases the results of part two of its annual bank stress tests on June 27.