Toxic Turkish Lira in A Free-Fall, Can Push EUR/USD to $1.04

The collapse of the Turkish lira spreads its toxic influence on the European and EM financial markets. Asian bourses have been losing more than 1% on Monday morning amid the increased demand for safe-haven assets. The futures on S&P500 lose 0.1% at the start of Monday trades, falling for the fourth trading session in a row. 

In addition, most of the emerging countries’ currencies, including the Mexican peso and the South African rand, are under pressure. The Turkish lira has lost 11% to 7.11 per dollar since the start of trading on Monday but somewhat stabilized after the country’s Minister of Finance gave an assurance that the government was working on a draft plan to stabilize the situation.

Thus, the epicenter of problems has moved from the Asian region and trade conflicts between the USA and China, the demand for the yen as a currency-haven has again increased. On Monday morning it adds to almost all the most traded currencies, including the dollar.

The technical analysis is on the side of dollar bulls. The dollar index came out of the trading range of the previous four months with a powerful movement, which is a strong signal demonstrating the continued growth of the American currency. The targets for the bulls may be near a psychologically important level of 100, which is about 4% higher than the current mark. It is possible that we can see an even more decisive offensive of the American currency.

The common currency was also hitOn Monday morning the EURUSD loses 0.2% after a decrease of 1% on Friday. The relationship between the Turkish economy, which goes down the drain following the lira, and the EU financial sector is capable of generating speculation that the ECB can change its plans to raise rates by deferring them to a later date than the summer of 2019. The EURUSD collapse last week could be a serious signal to decrease for the single currency. 

It is technically worth paying attention to the “head-and-shoulders” formation. The falling below support line at 1.15 last week marked the overcoming of the “neckline” in this technical figure, which opens the way to the area of the start 2017 lows, near 1.04.


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The strengthening of the dollar has an only limited impact on the gold. The precious metal dropped by $1208 per ounce from $1217, losing 0.8%, but by now it managed to stay above the recent lows for August at about $1205. Taking this mark can open the way to its deeper immersion. However, it is worth noting that the sale of the gold has lost its momentum, and after the consolidation, a reversal to growth can be expected. This growth can be supported not only by the seasonal demand but also by the investors’ flight from developing markets to safe-havens.

This article was written by FxPro

Turkish Residents Turn To Cryptocurrency As U.S Triggers ‘Economic War’

Steel & Aluminum Tariff Raise

Turkey finds itself in a ferocious economic meltdown on President Donald Trump approving a 20% tariff increase on the country’s Aluminum export and a 50% tariff increase on Steel. The turmoil has increased the appeal of most cryptocurrencies with Bitcoin (BTC) adoption on the rise.

The standoff between the two countries stems on Turkey refusing to budge to pressure and release evangelical pastor Andrew Brunson on trial for terrorism charges. Turkey opting to purchase Russian defense system also appears to have exacerbated the tensions.

“If the U.S. is turning its back on us…choosing a pastor instead, sorry…we continue our path with decisive steps. This treatment by America of its strategic partner has annoyed us, it has upset us,” said President Tayyip Erdogan.

A 30% plunge of the country’s currency Lira has forced Turkey’s residents to turn to cryptocurrencies for economic relief. The country’s cryptocurrency exchanges have started experiencing a spike in trading volume a trend expected to gain momentum as the citizens lose confidence in fiat currencies. The Lira alone is down by more than 40% for the year.

While trading volume remains low compared to that registered in other countries, the same could change as the Lira continues to lose value against the majors. Turkish Lira made up 0.07% of all Bitcoin trades in response to the tariff standoff; more than double the average volume recorded by local exchanges.


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Increased Crypto Adoption

Cryptocurrencies exchanges are increasingly cropping up to take advantage of increased demand for cryptocurrencies services. One crypto user by the pseudonym Bitmov has been using Bitcoin to buy digital ads abroad and now reports an increase in interest from friends and family looking to purchase digital currencies.

Increased cryptocurrency adoption also comes at a time of waning confidence on the country’s financial system. In recent years, citizens have questioned the country’s economic policies which they fear are not doing much to avert the effects of the severe debt crisis.

Turkish residents appear to be following on the footsteps of other countries that have turned to cryptocurrencies to avoid economic sanctions triggered by a standoff with the U.S. Venezuelans have turned to cryptocurrencies on the country’s currency diving on a standoff with the U.S. Iran is another nation that is considering launching its own cryptocurrency as a way of boosting the economy following economic sanctions from the U.S.

Concerned by the effects of the economic war with the U.S Turkish lawmakers are reportedly considering the creation of a national cryptocurrency.

While a good move, local exchanges remain skeptical about its potential impact is given Bitcoin’s popularity. The exchanges fear the government following Iran footsteps and restricting access to Bitcoin exchanges as a way of raising the nations’ official cryptocurrency profile.

Geopolitical, Domestic Events Drive Higher-Risk Currencies Sharply Lower

Geopolitical and domestic events drove most major currencies lower last week with the exception of the Japanese Yen which posted a modest gain.

New Zealand Dollar

The New Zealand Dollar closed sharply lower against the U.S. Dollar last week after the Reserve Bank unexpectedly committed to keep interest rates at record lows through to 2020 on disappointing economic activity. The dovish news caught investors off-guard, fueling a massive sell-off in the currency.

The NZD/USD settled at .6577, down 0.0171 or -2.53%.

The Reserve Bank of New Zealand kept its official cash rate on hold at 1.75 percent in a widely expected move. It also downgraded its forecasts for 2019 gross domestic product growth to 2.6 percent from 3.1 percent.

The RBNZ sees the cash rate steady for much longer than earlier forecast, signaling stable rates until late 2020. Back in May, the central bank had projected rates at 2.0 percent by March 2020.

Australian Dollar

The Reserve Bank of Australia wasn’t as dovish as the RBNZ, nonetheless, the Australian Dollar weakened as the central bank showed no intention of raising rates over the near future.

The AUD/USD settled at .7295, down 0.0102 or -1.38%.

Last week, the RBA ended its August monetary policy meeting by holding rates at a record low of 1.50 percent, marking two whole years with no move in interest rates, the longest policy pause in its modern history.

“Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual,” RBA Governor Philip Lowe said in a statement, reiterating his previous outlook.

Late in the week, the RBA issued an upbeat monetary policy report, with policymakers continuing to project that “above trend” economic growth will drive the unemployment rate lower, and wages higher, thereby pushing consumer price inflation higher over coming years.

Despite the upbeat report, investors felt the projected increase in inflation is still insufficient for markets to boost expectations for an Australian interest rate rise before late 2019.

Japanese Yen

The Dollar/Yen was under pressure last week on trade tensions and on revelations the Bank of Japan is under pressure to move away from its accommodative policy.

The USD/JPY settled at 110.933, down 0.340 or -0.31%.

A summary of opinions from the July 30-31 BOJ board meeting released on Wednesday showed that one member wanted to allow long-term yields to move in an even wider band than the range indicated by the central bank.

Geopolitical Tensions and Safe-Haven Buying

Geopolitical tensions in Turkey drove the Lira sharply lower, causing investors to dump higher-yielding currencies like the Euro, Australian and New Zealand Dollars. Money then flowed into the safe-haven U.S. Dollar and Japanese Yen.

The Euro in particular was crushed to its lowest level against the U.S. Dollar in more than a year as a plunging Turkish Lira sparked broad risk aversion, with investors worried about a contagion effect on European banks. Turkey’s Lira plummeted as much as 18 percent on Friday as worries about President Tayyip Erdogan’s influence over monetary policy and worsening U.S. relations snowballed into a market panic.

The Russian Rouble also retreated to its lowest level since November 2016, weakening beyond the psychologically important 65 per dollar threshold, after the Trump administration said it would impose fresh sanctions on Moscow.

U.S. Equities Retreat, Treasury Yields Plunge as Turkish Lira Tumbles on Global Credit Contagion Fears

The major U.S. stock indexes finished mixed last week with the S&P 500 Index posting a lower close for the first time since the week-ending June 29. Weighing on equities were worries of financial and currency turmoil in Turkey as well as continued tariff retaliation between the United States and China.

For the week, the benchmark S&P 500 Index settled at 2,833.28, down 0.2%. For the year, it’s up 6.0%. The blue chip Dow Jones Industrial Average closed at 25,313.14, down 0.6%. It’s up 2.4% in 2018. The tech-based NASDAQ Composite ended the week at 7,841.87, down 0.4%. It has gained 13.6% this year.

At mid-week, the S&P 500 Index had climbed to within half a percent of its all-time high set back in late January before profit-takers stopped the rally and fueled the weakness into Friday’s close.

Despite the weekly setback, the markets have proved to be resilient for a little over a month. Investors have had to overcome political turmoil, global trade spats and worries over rising interest rates. At the same time, healthy economic data and record corporate profits have helped underpin the indexes.

U.S. Treasury Instruments

U.S. government debt yields plunged on Friday as global credit contagion fears surrounding Turkey encouraged asset managers to aggressively move money into relatively safer assets.

The yield on the benchmark 10-year Treasury note fell 6 basis points to 2.873 percent, while the yield on the 30-year Treasury bond dropped 5 basis points to 3.03 percent.

U.S. Economic News

Consumer prices continued to rise in July, indicating a gradual increase in inflation pressures and suggesting further interest rate hikes from the Federal Reserve.

According to the U.S. Labor Department, the Consumer Price Index advanced 0.2 percent, the bulk of which was due to a rise in the cost of shelter. The CPI rose 0.1 percent in June. In the last year through July, the CPI increased 2.9 percent, matching the increase in June.

The so-called Core CPI rose 0.2 percent. The annual increase of the index which excludes the volatile food and energy components, was 2.4 percent, the largest rise since September 2008. Economists polled had forecast both the CPI and core CPI rising 0.2 percent in July.

Geopolitical Events

The Turkish Lira collapsed to an all-time low against the U.S. Dollar Friday even as Turkey’s leader, President Recep Erdogan downplayed the concerns, telling Turks “we have our God.”

The Lira fell more than 18 percent after President Donald Trump authorized the doubling of metals tariffs on Turkey.

Trump’s comment came after Turkish President Erdogan asked citizens to “change the Euros, the Dollars and the gold that you are keeping beneath your pillows into lira,” noting this is “a domestic and national struggle.”

Fear of contagion due to the events in Turkey also triggered a steep break in the Euro on concerns that some Euro Zone banks faced exposure to struggling Turkish banks.

August Seems Hot for the Currency Market, Trump’s Sanctions or Tariffs Spook Emerging Markets Currencies

This August seems hot. Not only temperature but also currency market volatility is rising. The period of active vacations, which is accompanied by a decrease in volumes, this time result in increased volatility. So far we have seen this in the EM currencies that have been subjected to sanctions or tariffs from the United States. However, the British Pound is also in the camp of suffered currencies.

More “hard” Brexit than it was expected earlier causes the weakening of sterling. Since the beginning of August, the British currency has lost more than 2%, dropping below the important level of 1.30 dollar. By the euro, the pound had sunk yesterday to the lowest values since September last year.

On Wednesday, the Russian ruble lost more than 3% on fears of new sanctions from the U.S. and as a result of a sharp drop of oil. The dollar rose to the highest rates in 21 months above 65.5 and completed the summer consolidation period.

Earlier the week, the Turkish lira lost more than 6.5% in a day, rewriting the historical highs to 5.42. Some rollback of the lira was short-lived, and today in the morning it has lost 2.4% and has returned to 5.40.


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The commodities market also cannot boast of the summer lull. Gold at the end of last week dropped to $1204 per ounce, and now stabilized near 1215. The main support factors, in this case, are the demand for protective assets against the Sterling backdrop and EM currencies drop and the extreme oversold of gold in the previous months. The recent report of the World Gold Council has shown a record volume of net short positions on this metal. Often, the excess oversold is a good signal for bulls to start buying. This is also evidenced by the RSI dynamics.

Oil abruptly lost on Wednesday amid the report EIA on the return of shale companies to net positive cash flow, which promises the growth in production, despite the rise in interest rates in the United States. As a result, Brent Crude oil lost more than 3%, fell below $72 at some point. WTI rewrote 2-month lows near $65.80.

It is noteworthy that the weakening of the pound has not caused any pressure on the euro. However, the euro is potentially vulnerable to this topic as investors switch their interest to the regions that are farther from the epicenter of the problems.

The positive dynamics of the euro and the strengthening of the Japanese yen constrain the dollar index from the growth, despite the pound weakness. As a result, DXY Remains near the upper limit of the trading range of the last months, adding 0.1% on Thursday. However, the increased demand for security is likely to allow U.S. currency to demonstrate its strength soon. It is also worth paying attention to the U.S.PPI figures, the acceleration here could give support to the American currency.

This article was written by FxPro

Turkey and Erdogan under Pressure as the Turkish Economy Crumbles

It’s been a torrid time for a number of emerging economies, as the U.S President goes down his list of must-dos and, while the early days of the U.S Presidency saw North Korea, Iran, and China grab most of the headlines, Turkey has not been left unscathed.

The threat of U.S sanctions has riled the global financial markets and sentiment towards the Turkish Lira and 10-year government bonds and like any emerging economy, the exodus from government bonds has led interest rates to 20% this week, as the Turkish government looks to stem the tide of a mass pull out of much needed foreign investment into the country.

Unlike other economies, including Iran, Erdogan is unable to rely on exports alone, with the withdrawal of foreign investment and the threat of sanctions a taster of what could lie ahead for Erdogan, who is coming under increased pressure to release detained U.S pastor Andrew Brunson, the detaining of Brunson the ultimate cause of the threat to hit Turkey with crippling sanctions that could ultimately lead to a possible default on government debt and even worse, a bail out from the IMF that would likely leave Turkey in the wilderness for years.

While Brunson has been held captive since late 2016, the increased intentions of U.S President Trump to deliver on its promise to protect U.S citizens means that while some threats of sanctions may ultimately end up in finding common ground, the U.S President is unlikely to waver and will ultimately deliver on the threat should Brunson not be released.

One wonders whether Brunson is the sole motivation for the U.S administration, with Turkey has become a hotbed for terrorist activities, a number of high profile attacks in recent years have shocked the world, with Erdogan seemingly unable to or unwilling to take the fight to his immediate neighbors.

Thrown into the mix has been Erdogan’s election victory in June that came with new powers, shifting Turkey’s political landscape from one of a democratic parliamentary system to a presidential system, ultimately giving Erdogan total autonomy over what many have begun to consider a rogue nation.

While Erdogan may have suggested that the increased power over the country would ultimately deliver stability, following the 2016 coup attempt, and prosperity, the latest events and Erdogan’s failure to identify signals that have contributed to the current state of affairs will leave many wondering over what lies ahead for the ailing economy.

Year-to-date, the Turkish Lira is down a whopping 40.64% against the U.S Dollar and 10-year government bonds hit record lows earlier in the week, driving yields to 20% before easing back to around 18%.

While a Turkish delegate is on its way to Washington in attempt to appease a situation that could spiral out of control for the Turkish leader and ultimately the economy, the U.S administration may have other intentions, with a request to cut ties with U.S enemy #1 Iran likely to be on the list.

One thing is for certain, Trump will be looking to leave Erdogan in as much isolation as possible to avoid a reprisal down the road and with that in mind, it will be of particular interest to see how the Turkish President can turn things around and draw in foreign investment at an already challenging time.


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The easiest solution would be to snuggle up to the U.S and become a true ally in the Middle East, though the very isolation would certainly rile Erdogan supporters at home and abroad, not to mention, leave the country more exposed than ever to reprisals from Middle East factions that could ultimately kill off what’s left of the Turkish tourist industry, once and for all.

Double-digit inflation, foreign currency debt, a surge in the cost of imports that Turkey depends upon for any goods that it delivers overseas and Erdogan’s unwillingness to allow the Turkish central bank to raise borrowing costs are a combination that paints a bleak picture and these are all before a possible meeting gone wrong in Washington.

Is a Strong Dollar Good for the US Economy?

China, Iran Russia, and Turkey are under Pressure

The threat of sanctions and tariffs from the United States puts pressure on a large part of developing markets. Chinese bourses are under pressure because of the threat of tariff wars. Iran is under threat of imposing sanctions because of the Iranian nuclear programme. Russia is vulnerable because of the suspicion of its interference in the elections. Turkey is under pressure because of the reluctance to release the American pastor. All these threats have already had an extremely negative impact on the business sentiments in the emerging markets, causing capital outflows and national currencies weakening.


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Strong Dollar: Good or Bad?

The big question is whether such strengthening of the US dollar is favorable for the American economy or not. For the long-term distance, the answer is simple – «No».  This is exactly what the President and the U.S. Treasury Secretary have said in the past. Nevertheless, in the short–term the dollar’s growth could help to reduce the US inflationary pressure, avoiding even more abrupt tightening from the Fed. Moreover, it should not be forgotten that the American budget has a huge deficit, and the States actively attract market capital to finance it.

As one of many consequences, the USD receives additional demand due to the flow into the liquid U.S. Treasuries (UST), which is abundantly offered to the markets in order to finance the enormous fiscal deficit.

Coincidence or not, but the effect of the U.S. president’s active economic pressure on other countries is counterbalanced by the effect of the overgrown debt securities offer. As a result of the increased demand for safe-heavens, the yield for 10-years treasuries bond remains close to 3%, reluctant to grow higher, as it was widely expected earlier and despite the Fed Funds rate hikes and acceleration in inflation.

At the same time, strong macroeconomic data of the U.S. economy and company reporting support the positive dynamics of American stock indices. On Monday, S&P 500 added 0.3%, and the index futures add another 0.1% on Tuesday, reducing the gap from January’s historical highs to only 0.9%.

Among individual shares, it is worth noting the growth of Facebook shares. In the recent days, the stocks had stabilized after a collapse and now attract investors who are betting on the rebound after an excessive decline. Taking an important line of 200-day moving average and exiting the oversold zone for RSI also support the bullish sentiment among those investors who look at technical indicators. Twitter shares have not turned to rally yet, but technical indicators demonstrate this possibility.

This article was written by FxPro

Fears of Higher U.S. Rates and Trade Wars Renewed Pressure on Emerging Markets, Turkish Lira Fell to New Historical Low

The US Fed kept its interest rates unchanged and indirectly confirmed the pace for further tightening of the monetary policy. The Fed noted the labor market strengthening, as well as the strong growth in household spending and business investment. The commentary did not provoke any big market reaction as it had expected such an outcome. However, it is worth noting that the probabilities of the hike in December increased. This process provides the dollar with moderate support, it adds the third day in a row and is traded near 94.50 at the time of writing.

Also, the U.S. Dollar was supported by strong employment report from ADP. The company noted an increase in the number of private sector jobs in the U.S. by 219K, which brought back the rate of growth to the strong numbers as it was at the beginning of the year. The dollar index returned to the end of last week, but in general, the developed markets keep the calm tone of trading.

At the same time, Asian bourses restarted their downturn on the new portion of fears around trade wars, amid the increased pressure from the U.S. presidential administration that threatened to raise the tariffs for imports from China up to 25% against 10% earlier. Chinese stocks are losing more than 1% in the morning, quickly returning to the area of one-year lows achieved last month. The Chinese yuan also remains under pressure, trading in the 13-months lows.


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New evidence that Fed sticks to its plan for 4 hikes this year and the “flexibility” of the Bank of Japan with 10-years notes yield have the biggest impact on the emerging markets. The capital outflows from EM may increase due to the interest rates spread failing to the U.S. rates, as well as the fears that trade conflicts would significantly slow the economic growth in the Asian region.

Elsewhere the Turkish lira fell to new historical lows after the reports that the United States had imposed sanctions against Turkish officials who had participated in the detaining of the American pastor. USDTRY rose to 5.0, losing more than a third of its value since the beginning of the year.

This article was written by FxPro

Markets Summer Lull Can Be Broken by Major Central Banks, Emerging Markets Currencies Under Pressure

The currencies of developed countries are moving within a narrow range at the beginning of the eventful week. The dollar index is around the mark of 94.50 and has been trading for two months in a range of slightly over 1% around this level. This quiet trading environment can be broken this week after the announcement of the decisions took by the Bank of Japan, the Fed, and the Bank of England, as well as the publication of the U.S. employment data.

Developed markets currencies are experiencing a period of low volatility after the dollar growth period from the end of April to the end of May. The closest market focus is how the Bank of Japan adjusts its policy. More hawkish tone can push down the Asian markets at a time when they are vulnerable amid the fears of trade wars.

With the meetings of the largest central banks and important statistics, the week ahead is able to open a period of increased volatility after a long period of a summer lull. Earlier, the Fed’s head made it clear that the U.S. central bank is set to tighten its policy. Market participants will closely monitor if the Fed is set to raise its rates in September while remaining committed to the 4th increase in 2018.


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The Fed’s hawkish rhetoric can increase the difference in the dynamics of developing countries’ currencies. Unlike the major world currencies, in the EM there has been a noticeable differentiation in recent weeks.

The Russian rubble enjoys the continuation of high oil prices period. The Mexican peso gains after the elections last month and on the expectations of the profitable negotiations on NAFTA.

At the same time, the Chinese yuan has been falling for the recent two months at its highest rate in many years on easing the PBC policy and on fears about the consequences of trade wars with the United States. The Turkish lira declined to all-time lows due to the threat of the U.S. sanctions and after the Turkish CB had kept the rates against a widely expected increase last week, which was perceived as a loss of independence of the local regulator. The Argentine peso is also under attack, despite the assistance from the IMF to the country. The Indian rupee is close to the historical minimum to the dollar, in spite of the strong growth of the economy.

The dividing line for the currencies of developing countries became the balance-of-payments factor. Turkey, India, and Argentina have a significant deficit and are dependent on the inflows of capital from outside. China formally has a surplus, however, the economy of the country’s regions depends on outward investment, requiring favorable investor relations.

This article was written by FxPro

Markets Froze Before Trump-Juncker Meeting on International Trade; RUB, TRY Sharply Fell on Tuesday

The US stock markets were marked by Tuesday’s growth in strong earnings reports, which allowed S&P500 to add 0.3% on Tuesday’s results. On Wednesday, by the beginning of Europe session, the futures for S&P index remains near the closing levels of the previous day. It is also worth mentioning the growth of companies’ shares in the agricultural sector thanks to Trump’s pledges to help farmers in case of a full-scale trade war with the EU and China.

Trade wars will be in the spotlight of markets again. The negotiations between Juncker and Trump focusing on international trade issues will be held on Wednesday.

The EURUSD has traded in a narrow range for the second day in a row, remaining close to 1.17 level in anticipation of important comments in the second half of the week. In addition to the meeting of Trump and Juncker, it is also worth highlighting tomorrow’s meeting, where the markets will try to grasp how seriously the central bank estimates the economic damage from already introduced measures and uncertainty around the future tariff policy.

Among the currencies of emerging markets is to highlight yesterday’s weakening of the Russian rouble and the Turkish lira, despite the overall increase in demand for risks. TRY lost more than 4% and returned to the area of historical lows to the dollar after Central Bank of the Republic of Turkey had kept the policy rate at 17.75%. The markets considered this as a strengthening of Erdogan’s power, as he earlier had expressed publicly his preference for a less stringent policy despite inflation.

The Russian rouble lost almost 1.5% last night after Trump’s tweet stating that Russia “will be pushing very hard for the Democrats” in the upcoming elections. These words were perceived by the market as Trump’s willingness to support new sanctions against Russia. Up to these words, the Russian market almost ignored the reports of a new U.S. Senate sanctions package.


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Nor can it be ruled out that the current negotiations may also be of a positive nature. It is very likely that the stakes are high enough and the time has come to negotiate. Yet the main expectations of bidders are that the world’s largest economies can avoid full-fledged trade wars and protectionism.

Significant macroeconomic releases include the publication of sales statistics for new homes in the United States, as well as the reporting of such companies as Facebook and Visa.

This article was written by FxPro

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.