Trump-Juncker Meeting in Focus, Lira Crumbles

European markets could benefit from the risk-on sentiment; however, gains may be limited as investors adopt a guarded approach ahead of a meeting between the EC President Jean-Claude Juncker and US President Donald Trump. With escalating trade tensions between the European Union and the United States still, a key theme that continues to weigh on global sentiment, the outcome of today’s meeting could leave a lasting impact on the markets. If the talks prove unsuccessful and trade tensions end up escalating further, risk sentiment is likely to be negatively impacted.

Market players should be prepared to expect the unexpected from the talks, especially when considering how highly unpredictable the Trump administration can be.

Turkish Lira crumbles after central bank holds rates

The Turkish Lira depreciated heavily against the Dollar yesterday after the nation’s central bank defied market expectations by leaving interest rates unchanged at 17.75%, despite inflation soaring.

This move immediately raised questions over the central bank’s independence, a month after President Recep Tayyip Erdogan’s re-election under an amended constitution that enabled him to follow through on his promise to take more direct control over monetary policy. Outside of Turkey, global trade tensions, a broadly stronger Dollar and expectations of higher US interest rates have exposed to the Lira to downside risks. With a combination of external and domestic factors eroding buying sentiment towards the Lira, the local currency remains at risk of depreciating towards 5.00 and beyond against the Dollar.

Currency spotlight – EURUSD

The EURUSD was on standby on Wednesday morning, as investors positioned ahead of the anticipated meeting between US President Trump and European Commission President Jean-Claude Juncker.

Heightened concerns over a trade war with the United States have shaved some attraction away from the Euro and this can be reflected in the bearish price action. There could be some action on the EURUSD today depending on the outcome of the meeting. Focusing on the technical picture, the EURUSD remains in a wide range on the daily charts. Sustained weakness below 1.1700 could inspire a decline towards 1.1640 and 1.1600, respectively. In regards to the longer-term outlook, the divergence in monetary policy between the European Central Bank and the Federal Reserve could ensure the currency pair remains depressed for prolonged periods.

Australia Inflation Rises Modestly in Q2, Turkish Lira Moves Close to Its Record Low Against US Dollar

The U.S. dollar was seen trading rather mixed on Tuesday. Economic data was sparse. The commodity-linked currencies got a boost after reports of China’s new spending plans were released.

In the overnight trading session, the Australian inflation report showed that consumer prices advanced 0.4% on the month. This was the same pace of increase seen the month before. The trimmed mean CPI increased 0.5% on the quarter, matching the median forecasts.

On an annualized basis, inflation in Australia was seen rising 2.1%, just shy of the 2.2% increase that was forecast.

The Turkish Lira tumbled yesterday after Turkey’s central bank held its rates at 17.75%. TRY is trading at 4.8704 versus the greenback, close to its all-time low at 4.97.

Looking ahead, the economic data for the day is relatively light. The NY trading session will see the release of the new home sales report. New home sales are forecast to rise 671k during the month. This marks a slower pace of increase compared to 689k in the previous month.

The data comes following a weaker existing home sales report.

EURUSD intra-day analysis

EUR/USD 4H Chart
EUR/USD 4H Chart

EURUSD (1.1678): The EURUSD currency pair was seen closing with a Doji pattern following Monday’s reversal of the resistance level near 1.1730. A bearish follow through on the day could potentially push the common currency lower. Price action is seen consolidating around the short-term support/resistance level near 1.1686 regions. To the downside, we could expect a decline back to 1.1600 level. A break down below this level could trigger further declines toward 1.1540 regions. With the ECB meeting coming up tomorrow, the EURUSD is likely to remain subdued.

USDJPY intra-day analysis

USD/JPY 4H Chart
USD/JPY 4H Chart

USDJPY (111.29): The USDJPY currency pair was seen bouncing off the support level at 111.13 – 110.85 region. The brief rebound off this level was met with resistance from the falling trend line. The failure to break above the trend line indicates further consolidation. This also improves the prospects of a downside breakout. A close below 110.85 could send the U.S. dollar lower toward the 109.45 level of support. This will also validate the bearish flag pattern that is likely to emerge.

XAUUSD intra-day analysis

Gold 4H Chart
Gold 4H Chart

XAUUSD (1224.17): Gold prices were seen trading subdued as price action continues to remain support above the 1219 level. We expect to see this sideways pattern continue ahead of a potential breakout. To the upside, the resistance level at 1247 – 1242 remains a prime target. Establishing resistance here could, however, keep gold prices range bound within the current levels. To the downside, in the event of a break down below 1219, we expect to see the declines sending gold prices lower to test the 1200 level.

This article was written by Orbex

Scalping, Swing and Long-Term Trading Strategies: A Complete Guide

tradiThere are many different trading styles, and some of them will fit your trading personality. Each trading style, whether long-term or short-term, will allow you to generate gains if you combine it with a robust risk management strategy. Prior to developing a trading strategy, you should determine if you want to be very active or more passive. Are you comfortable holding positions overnight, or do you want to enter and exit during the course of a trading session? Would you prefer trading the popular currencies such as EUR/USD, GBP/USD or AUD/USD or perhaps the more exotic pairs, volatile and less liquid such as USD/TRY or USD/CNY? You should also ask yourself whether you are a value investor or like trading momentum. These questions will help guide you toward developing a trading strategy that matches your trading personality.

Your Trading Personality

Everyone has a trading personality. This is not solely determined by your willingness to accept the risk. Your trading personality stems from your desire to initiate risk and hold that risk. Some people need to be right at once, while others are content letting the markets take their natural path to their desired level.

Your trading personality also incorporates your ideas on investing. Are you the kind of person who is looking for value? Are you willing to catch the market and buy when others are selling or do you like the idea of jumping on a trend and getting off as soon as it accelerates? These concepts will help you determine if you are looking to trade a short-term or a long-term strategy. Remember, if you don’t have the time to watch the markets actively during the day, then a short-term strategy will likely be the wrong fit.

Types of Trading Strategies

There are several strategies that you can use based on your trading personality. If you like long-term trading strategies, you might consider the trend-following strategy. If you are more interested in short-term trading strategies, you can consider scalping or swing trading.

Long-Term Strategies

There are a couple of long-term trading strategies that are great for traders who are not looking for instant gratification. Two of the most popular are trend-following and contrarian trading strategies.

Trend Following

A trend-following strategy is one where you attempt to capture a trend where the exchange rate of a currency pair moves in the same direction for an extended period. One of the most efficient trading indicators that you can use to identify a trend is the Moving Average Crossover trading strategy. A moving average crossover uses two different moving averages to identify a change in the direction of a trend.

A moving average is used to smoothen the change in price action. A moving average is calculated by determining the average over a specific period. For example, the 20-day moving average is the average for the last 20-days. On day 21, the first exchange rate in the period is a drop, and a new average is calculated.

scalp

The moving average crossover strategy targets a time when a shorter-term moving average (such as the 20-day moving average) crosses above or below a longer-term moving average (such as the 50-day moving average). The red arrows on the USD/JPY chart shows crossover sell signals, while the green arrows show crossover buy signals. These crossovers represent periods in the middle of the trend. It is important to find a broker that provides low spreads with fast execution, such as Admiral Markets. There will be times when the market is in consolidation, meaning there is no visible trend, but you still receive a signal. The goal in trend following is to generate as much as you can knowing that markets only trend 30% of the time. Many traders use the opposite crossover to exit a position. For example, you enter a short position at the red arrow and stop and reverse at the green arrow. Alternatively, you can add a trailing stop or a specific risk vs. reward ratio to your risk management.

Swing Trading

The parabolic stop and reverse (SAR) is a swing trading system that is both time and price based and refers to a price-and-time-based trading system. The system was introduced by J. Wells Wilder. The parabolic SAR trails the price as the trend extends over time. This system always has you in a position that is reversed when you reach a signal. The indicator is below prices when they are rising and above prices when they are falling. The calculation of the parabolic SAR is based on the distribution of price and geared to catch a swing or trend in the market. You follow the trend until you receive the opposite signal. For example, you short the USD/JPY at the red arrows and reverse and buy at the green arrows.

long term

You can use the stop and reverse methodology for weekly data to make it longer-term, but most traders use daily or intra-day data, which means you have to watch the markets and be ready to stop and reverse.

If you are looking for a very short-term trading system, you might consider scalping the markets. This is a term that describes quick entries and exits with well-defined risk vs. reward parameters. You might consider using an indicator, such as the Fast Stochastic on intra-day data. This will provide you with short-term signals to scalp the market.

short term

The Fast Stochastic measures the rate accelerating in the exchange. When it moves too fast, the Fast Stochastic will rise above the 80-oversold trigger level. When the exchange rate declines too fast, the Fast Stochastic drops below 20. If you are able to place tight risk-reward parameters and buy when the Fast Stochastic drops below 20, you can also sell when the fast stochastic rises above 80. The Fast Stochastic also generates a crossover buy and sell signal. which can be added to your trading strategy to confirm your signal.

Summary

Whether you are trading a strategy that catches a trend or want to scalp the market for quick gains, you want to make sure that the strategy you chose matches your trading personality. Obviously, you must find a reliable broker to provide you with a good trading platform that allows you to operate a wide range of trading strategies. Admiral Markets is one of them. The company not only provides you with the cutting-edge trading platforms but also is a regulated broker that offers you a package of advanced Volatility Protection Settings and Risk Management. If you are trying to scalp the market, make sure you have time during the day to dedicate to your strategy. If you are more comfortable taking a long-term view, the trend-following strategy might be the best course of action.

This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. The presented trading analyses refer to past performance which may change over time.

Erdogan’s Biggest War is Inflation: The Turkish Lira in a Free Fall

The Turkish Lira weakened again after President Erdogan announced his new cabinet, which included the appointment of his son-in-law, Berat Albayrak, as Finance Minister.

Turkey’s currency has been consolidating since late May, and is still within the consolidation range, although it is now once again testing the top of this range. The trend toward a weaker currency has been accelerating since 2016, and the balance of probabilities would point to the next move being to 5.00 and beyond.

USD/TRY Weekly Chart
USD/TRY Weekly Chart

The Lira is the victim of a perfect storm. Emerging markets are under pressure, Turkey’s inflation rate is accelerating, and investors are increasingly skeptical of Erdogan’s leadership. The appointment of a family member to the crucial post of Finance Minister is just the latest in a series of moves by Erdogan to consolidate power.

Inflation Is the Biggest Challenge

Of all the factors plaguing the economy and the currency, inflation is the biggest problem. The economy is now in a self-perpetuating circle, with the weakening currency leading to higher inflation, and higher inflation further hurting the currency.

Investors are often prepared to overlook poor governance and leadership, and even corruption, if they believe an economy is structurally sound. In Turkey, this just isn’t the case.

In June the inflation rate rose to 15.39. That’s a 14 year high and by far the highest rate for comparable emerging economies. Brazil’s inflation rate now sits at 4.39%, South Africa’s is 4.4% and most comparable economies in Asia are below 2%. Only Argentina (26.4%) and of course Venezuela (25,000%) are higher. The weak currency also means inflation is likely to rise even further in the second half of 2018.

The domestic economy is seeing little benefit from exports, and the government’s capacity to provide stimulus is limited. Corporations have large piles of US denominated debt to service using depreciating Lira denominated revenues. Investors are particularly concerned about corporates, as bankruptcies would likely trigger a new wave of economic problems.

The higher cost of imports flows directly into the inflation number and reduces consumer spending and confidence too. The highest price rises were seen in the transport sector, and any further strength in the oil price will add fire to the storm.

The market is expecting rates to be raised when the Central Bank meets on 24th July. But Prime Minister Binali Yıldırım said last week that the country’s top priority will be to lower both interest rates and inflation which are both in double digits. Erdogan himself has said that he doesn’t believe higher interest rates will reduce inflation and even suggested he may take over the rate-setting process. By appointing his son-in-law as Finance Minister, he’s getting close to doing just that. He has also vowed to appoint the next Central Bank governor himself. But, how he expects to bring inflation down without raising rates remains to be seen.

The Technical Picture

As it stands, resistance will come into play between 4.748 and 4.816. Beyond that, the immediate target will be 4.931, the previous high, and then the psychological level of 5.00. And, if we see the full bull flag pattern play out, we could see 5.50 quite quickly.

USD/TYR Daily Chart
USD/TYR Daily Chart

Can it Reverse?

The contrarian argument is less convincing but worth considering. Firstly, there is a lot of bad news now baked into the price. If the news flow doesn’t deteriorate further, holders of short positions may exit. Secondly, Turkish bonds are now yielding 16 percent which has to be attractive in such a low yield environment. In addition, emerging markets which have been under pressure for some time, are now offering value. If the tide turns, Turkey may benefit from broad buying of emerging-market assets.

If the Lira strengthens, support will come into play between 4.48 to 4.44. A convincing break of 4.44 would open targets of 4.19 to 4.22, and then stronger support at 4.01. Long-term support would come in at around 3.92. However, any sort of reversal would likely be accompanied by increasing volatility and precise targets would be less relevant.

While these factors and a possible interest rate increase could lead to a reversal in the medium term, in the longer term it would likely only be a correction.

Without a sound of economic policy, inflation will remain high and the Turkish Lira will remain vulnerable.

Stocks and Euro Sink on Political Uncertainty in Italy, Turkish Lira Stable

The euro currency’s rebound lost its steam after reaching the 1.1730 area. During the European session, EURUSD lost just over 1%, coming close to the 6-month lows near 1.1550. The flow of strong data from the United States, signs of a slowdown in Europe and the threat of a political crisis in Italy caused the euro to decline by 6.5% in 7 weeks. Italian stock index, FTSE MIB dropped 3.21% on Tuesday.

GBPUSD continues its fall to trade near 1.3250, while USDCAD has seen a decline to trade near to 1.30. USD has given up gains against JPY and has stabilized against a number of EM (emerging markets) currencies. This combination is very unusual as the growth in JPY is often perceived as a safe haven. It is very likely that after a short correction the EM currencies could experience a new wave of downward pressure.

Oil Prices Under Pressure

Brent had begun the week and falling to 74.60 per barrel but has recovered to around 75.60 at the start of Tuesday’s trading. It is possible that the lull is due to low trading activity and today more players will add to price pressure, due to expectations of rising production in the coming months.


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Turkey’s Central Bank Stabilises Turkish Lira

Among notable movements in the markets, it is worth highlighting the rollback of the Turkish lira after the press release of the central bank on the simplification of the monetary policy framework, making the weekly repo rate (now 16.5%) as its Key rate. Earlier last week the Bank of Turkey increased this rate by 3 percentage points. All these measures are positively perceived by the markets and helped TRY to stabilize after falling 20% in May. The positive news for TRY has a favorable impact on the overall market attitude of developing countries. It also helps to reduce the yield of the American 10-year Treasuries, which makes the purchase of USD denominated debt less attractive.

Early morning Asian markets were in cautious mode due to protests in Brazil caused by rising fuel prices. These protests make the markets wonder whether current quotes are a serious obstacle to further global growth. In these circumstances, a major energy consumer, Asia, is also experiencing a decline in stock prices. The political situation in Italy, the caution of Asian exchanges and the increased demand for safe assets are likely to keep the demand for USD during Tuesday trading.

Among significant publications today we have the release of the Consumer sentiment indicator in the U.S. This indicator is close to multiyear highs, and the expected decrease can be a sign of the peak and turning to downwards.

This article was written by FxPro

Markets in Turmoil: Global Stocks Fall, Euro Sinks, Oil Hits Six Weeks Low

The market turmoil continues as Oil reached a six week low yesterday after backing away from strong resistance at $73.00 early last week. The Inventory data on Wednesday, showing an unexpected build of 5.778M, compounded the pressure followed by increases in US Oil Rig counts to 859 on Friday and reports of Saudi Arabia and Russia agreeing to ease output cuts ahead of the next OPEC meeting next month in Vienna. The rumor is that the easing of cuts will add an additional 1 million bps to the market which could see further falls in the price which is currently at $66.77. USDTRY fell to 4.55475 as lower prices would ease inflation worries.

Global stocks fall on Tuesday morning and the Euro sinks to six months low as the Italian turmoil and US-North Korea talks about new sanctions continue to add uncertainty into the markets. The Volatility Index (VIX)  rose 9.38% to 14.44.


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German IFO – Current Assessment (May) was 106.0 against an expected 105.5 from 105.7 previously. IFO – Expectations (May) was 98.5 against an expected 98.5 from 98.7 prior. IFO – Business Climate (May) was 102.2 against an expected 102.0 v 102.1 previously. The data shows a steadying business climate in Germany after the fall in the March data but with a lot of work to do to regain the previous highs. This data cannot be ignored as it surveys 7,000 businesses and is a leading indicator of economic direction. EURUSD moved up from 1.16841 to 1.17285 after the data was released.

US Durable Goods Orders ex Transportation (Apr) were 0.9% against an expected 0.5% from 0.0% previously which was revised up to 0.4%. Durable Goods Orders (Apr) was -1.7% against an expected -1.4%% from 2.6% previously which was revised up to 2.7%. This data series diverged last month with ex-transports missing expectations and the headline data exceeding its consensus. This divergence continued but the data showed a fall in headline data and a rise in ex-transports. EURUSD moved up from 1.16650 to 1.16865 after this data release.

  • EURUSD is up 0.05% overnight, trading around 1.16297.
  • USDJPY is down -0.30% in the early session, trading at around 109.081
  • GBPUSD is up 0.04% this morning trading around 1.33138.
  • USDCAD is down -0.06% overnight, trading around 1.29859
  • Gold is up 0.03% in early morning trading at around $1,298.00
  • WTI is up 0.21% this morning, trading around $66.77

This article was written by FxPro

Turkish lira…And down it goes

The recent history for the Lira says that in January of 2005, after a devastating fell of the currency a new version of the Turkish Lira was issued.

Lira’s value fell so dramatically that the conversion was $1 to 1.5 million TRY.

As the Turkish economy mostly relies on quick short term profits on higher interest rates that make the currency very sensitive on any global economy headwinds and the subsequent risk off environment may lead to massive depreciations of the Lira.

Although the nation wishes Turkey to join the Euro Zone, political conditions in Turkey and economic issues in the EU continue to delay the process.

After the rating agencies reveled on Tuesday the possibility that Turkish President Tayyip Erdogan will pull back the levers and tighten more the monetary policy the Turkish lira tumbled again to a fist time low of about  4.8449 per USD in early Asian trade on Wednesday according to investing.com.

After the aggressive political decision of Turkish President and the uncertainty that governs the country we can clearly see that the aftermath of those decisions may possibly  further depreciate the Turkish Lira.

Although the Turkish economy might not be in a favor of the home currency, traders and investors may take the opportunity to further hit the lira with a tsunami of sell off and creating a further depreciation of the currency.

Now regards to the other side of the pair based on SINGAPORE (Reuters)

The US Dollar was higher against the basket of currencies yesterday (Wednesday).

Investors were eager for the Federal Reserve’s last policy meeting to see if they can gather some clues on the pace of further U.S. monetary tightening.

According to investing.com the dollar index (DXY), which measures the currency against a basket of six major peers, rose 0.1 percent to 93.681. On Monday, the index set a five-month high of 94.058.

The US Dollar gain more than 4% from the last month and that was the result of the U.S. economic data and expectations that the Fed probably may raise interest rates at least two more times this year.

USTRY Daily Chart

Based on the crossing of the 2 EMAs here 36 and 12 we can see that the price heads upward.

Any actions for potential bullish signals might be taken into consideration in case the price  reverses to the first EMA (12) which will be  approximately in the same level as the Fibonacci 38%

USTRY Daily Chart

 

This article was written by Marios Athinodorou, TeleTrade’s market analyst, and commentator. Among others, Marios is delivering weekly trading webinars. Sign up for upcoming webinars here.

Turkish Lira and Russian Ruble Technical View

Key Points

  • USDTRY Record Highs
  • USDRUB Fresh Bearish Kumo Breakout

Turkish Lira (USD/TRY) Technical Analysis

This pair hits the record highs this month which can be noted based on the Ichimoku system.

the price is out of the cloud and the tekan sen and kijun sean seem to be in a bullish formation.

The chikou span is above the price meaning that the uptrend may potentially continue with no technical obstacles at the moment.

But before we start looking for any potential bearish signals we need to have a bounce on the tekan sen or kijun sen and we need also to pay attention to stochastic.

USD/TRY Daily Chart

USD/TRY Daily Chart
USD/TRY Daily Chart

Russian Ruble (USD/RUB) Technical Analysis

Based on Ichimoku system it can be noticed that the price is below the cloud the kijun sen and the tekan sen seem to be in a bearish formation. The chikou span appears below the price.

What we would like to see here is the possibility of the price to bounce on the tekan sen before start looking for any potential signals.

USD/RUB 1H Chart

USD/RUB 1H Chart
USD/RUB 1H Chart

This article was written by Marios Athinodorou, TeleTrade’s market analyst, and commentator. Among others, Marios is delivering weekly trading webinars. Sign up for upcoming webinars here.