Global Stocks Mostly Higher as Trade Talks Begin, FOMC Supports Dollar Protecting Rate-Hike Plan

The American dollar adds to major competitors after the publishing of the FOMC minutes yesterday. The dollar index adds 0.4% in response to the protocols to the July meeting when the Committee members have discussed the further policy of interest rate tightening. This news helped the American currency to turn to growth after five trading sessions of decline. The Fed’s support came just when the dollar index, DXY, tested the former level of resistance of the trading range that now became support. FOMC comments have returned the expected probability of raising rates in September to 96%, same as one week earlier after the decline to 93.6% in the first half of the weekFOMC sticks to its hiking plan despite Trump’s comments

The dollar also received support overnight on the news that the punitive 25% tariffs for goods in the amount of $16 bln were introduced by China and the US, bringing the total amount of goods that fell under tariffs to 50 bln. These measures have been announced earlier, but the markets have not been able to avoid weakening on their return to such a painful topic.

Moreover, this week, Washington will discuss the possibility of imposing elevated tariffs for Chinese imports of up to $200 billion worth of goods. MSCI index for Asia-Pacific region ex-Japan has lost 0.1% since this morning; the futures for S&P500 demonstrate the same decline. Overall, global stocks trade mostly higher on Thursday morning on hopes of US-China trade talks.

The introduction of import tariffs threatens to increase the inflationary pressure in the United States. If the country’s economy maintains a steady rate of growth, the Fed can begin to increase interest rates more actively to return inflation to the target rates. In this regard, the importance of macroeconomic statistics, which will come out in the coming months in the U.S., can further affect the FOMC plans for the forthcoming year. Interest rate expectations often act as a key driver for currencies.

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The EURUSD pair, which was as high as 1.1620 on Wednesday, experienced a decline to 1.1550 on Thursday morning, losing 0.3% after the publication of the Fomc Minutes. The British pound sank to 1.2870 from its highs near 1.2830 a day earlier. The Asian currencies are again under pressure due to the return of the trade conflict between China and the United States into the investors’ focus. The Chinese yuan is traded at 6.87 per dollar, adding 0.7% in the last 24 hours. The Japanese yen weakens to the dollar the third day in a row to 110.80.

This article was written by FxPro

Global Stocks Mixed, Trump Quickly Put Dollar Back to Trading Range. What’s Next?

The weakening of the dollar, caused by Atlanta Federal Reserve Bank President Raphael Bostic and Donald Trump’s comments, continues. The dollar index sank by 0.3% for the past 24 hours to 95.2, having played down the growth of the beginning of August and returned to the upper border of the trading range of the previous three months. The EURUSD pair has increased to 1.1570 on Wednesday morning against the lows at 1.13 one week earlier. Sterling, as well as Australian and New Zealand dollars, demonstrates a similar return to the trading ranges of previous months and a departure from one-year lows. GBPUSD recovered to the area above 1.29 after failing to 1.2650 last week.

Global stocks trading mixed so far on Wednesday morning as investors await the FOMC minutes tonight and US-China trade talks later on this week.

Trump’s comments about his discontent with the Fed’s hawkish policy came to a phase when the dollar was actively gaining momentum after the exit from the established range, and the movement was gaining momentum with the renewal of annual highs. The self-fulfilling wave of stop orders and flight from risks acted as a significant factor of support of the American currency. The rollback of the dollar has kept the influence of the first factor, allowing to normalize the markets for a while, but we can hardly speak about a full return of optimism.

The China and the US positions on trade are very far away, and there is still a long and bumpy road ahead of the summit of the leaders. Investors will be watching tariffs trade talks between the US and China later on this week. Earlier the markets were convinced that trade disputes would be resolved by the end of the summer, but for now, there is a faint hope that Trump and Xi will come to an agreement even in November.

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Chinese bourses are also under pressure in the morning on the PBC comments that it does not plan large-scale stimulus to accelerate the economic growth. The officials perceived the calming of the markets last week as a sign that the situation is under control as a whole. However, we should not forget that traditionally August is a quiet month in the equity market. 

In addition, there are few important macroeconomic news published this week. The major players return to the market by September can lay the ground for a big trend for the coming months.

The U.S. stock markets returned back to the peak levels of the beginning of the year. In the nearest future, we will find out whether there is enough optimism on the exchanges for new historical highs in the U.S. markets.

The dollar should also answer the question: was its growth to the levels of one-year highs the beginning of a new upward impulse, or only a false start, which was successfully stopped by a few words of the American president.

This article was written by FxPro

This Time Trump Can Stop the Dollar Rally

The dollar fell under pressure after Trump’s interview with Reuters, where he reiterated that he is “not thrilled” by the actions of the Fed and prefers a policy of low-interest rates. The dollar index lost 0.7% over the past 24 hours. EURUSD up to 1.1530, the maximum in the last 2 weeks.
Previously Trump used similar verbal interventions in an attempt to stop the U.S. Dollar rally. Such comments were made on July 19, which restrained the dollar from growth for several weeks. Investors were waiting for Powell’s reaction to the president’s dissatisfaction. However, the Fed has not changed the rhetoric, hinting at the willingness to raise rates as soon as September. In addition to raising the rate of the Fed, the dollar is also supported by Trump’s policy. Trade conflicts with China and diplomatic rifts with Turkey raise the demand for protective assets away from the epicenter of the crisis. Under these conditions, the dollar has played a role of safe haven asset.
Despite the fact that the central bank is pursuing an independent policy, the president and his administration are nominating candidates for key positions in the Fed, and several appointments are still to be made this year. The markets fear that Trump’s words may be a signal to search for more “dovish” candidates for key positions.

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Trump’s comments could play an important role in the dollar’s dynamics. EURUSD has returned to the area above 1.1500, back to the trading range from May to mid-August. If the pair is able to stay above this mark by the end of the day, technically it will cross out the recent dollar rally. In addition, the relative strength index (RSI) has returned from oversold levels for EURUSD that is another strong bearish signal against the dollar.
Thus, Trump’s words could seriously affect the technical picture of the dollar for the next few days, preventing it from pausing the rally with potential targets for EURUSD near 1.11 on even lower in 1.04 area. However, for Trump dollar is not a goal, but a means to achieve his political goals. The active imposition of sanctions, as was the case earlier this year against Iran, Turkey and Russia, will preserve the status of a protective asset for the dollar, and the new tariffs continue to force the Fed to raise rates to fight inflation pressure.

This article was written by FxPro

Crypto Market Lull Can Turn Into Significant Movement

This week the crypto market starts generally flat. Since the 8 of August bitcoin was stuck on the $6,400 mark. The market cap fluctuates in the range of $210 to $230 billion during the last two weeks. The major altcoins are at their lows and can’t attract buyers due to the crisis of confidence in the industry.

Because of the downward move and the lack of positive news around cryptocurrency Bitcoin seems to be affected in a negative way. Potentially the market lull can form the basis for a strong movement in either direction. In these conditions, the importance of the closest support and resistance levels drastically increases. In our case, these levels are $6000 and $6600 respectively. Going out of this tight range can likely strengthen the bitcoin movement.

The dull crypto market dynamics also reflects results of CoinApi research, which showed a significant decrease of trading activity on the largest crypto exchanges. Coinbase volumes plummeted 81% to $3.9 bln last month compared to its historical maximum at $21 in January 2017.

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The positive shift of this situation is the creation of various physical projects based on the blockchain technology. Deloitte conducted a research among companies with income up to $0.5 bln and found out that 23% of them have plans to invest in blockchain technologies between $5 – $10 mln in 2019. For instance, the delivery company UPS have recently applied for a patent to use blockchain technology in their delivery processes.

These factors don’t influence the market directly albeit in long perspective create a fundamental basis to reduce volatility and substantiate the rates movements.

This article was written by FxPro

Global Stocks Edge Higher on Planned US-China Trade Talks, Fed Can Form a New Basis for EM Currencies Outflow

Asian bourses remain moderately optimistic since the end of last week. Expectations are encouraging that the Chinese and Turkish authorities should be able to find economic support measures and stabilize the exchange rates of their currencies. Beijing defended its currency from a decline to 7.0 for the dollar last week, and also already offered to the US a meeting for trade negotiations this week.
As a result, Asian markets add about 0.3% this morning and CNH traded on 6.84, below last Wednesday near 6.96. The Turkish lira has stabilized near 6.0 for Dollar from the end of trading on Friday, despite the cut of sovereign ratings from S&P and Moody’s.
Most likely, the deterioration of ratings will exert additional pressure on Turkish assets in coming days. Turkish authorities bought some time with promises of decisive steps, but in most cases, the outflow of investors from the country’s assets continues for several months, even if the authorities manage to contain panic. Most likely the “bottom” of the Turkish crisis is just ahead.
Players on the dollar, however, fixed the profit from the previous strengthening of the American currency. The dollar index lost 0.9% in the second half of the week, more than half of which had to be on Friday. However, this week markets focus will shift on the comments from developed countries central banks.
In particular, this week the Fed and ECB will publish their previous meetings minutes. Also at the end of the week attention will be focused on Powell’s comments as part of the central symposium at Jackson Hole. Fresh assessments of recent developments on EM can have a serious impact on the dollar, as investors will be able to look at how this would affect the Fed’s plans.

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The latest episode with the markets of developing countries is a clear indication of the fragility of the markets currently and the vulnerability of the world economy to a further slowdown. If the Fed continues to focus only on internal indicators, it can lay the groundwork for a new wave of outflow from developing countries and develop the current momentum of strengthening the dollar by making it a safe-haven asset in times of turbulence in markets.

This article was written by FxPro

Bitcoin Still in Demand Following Period of Recessions

Bitcoin continues to “lick its wounds” after a devastating correction at the start of the previous week, pushing the total market cap up to $216 against lows at $189 billion, the lowest level since late October 2017. This recovery can barely be considered as strong despite the TOP-100 coins being mostly in the green zone, as their rates are significantly lower than they were before the correction.

Increased volatility rates and mining on the edge of profitability suppresses activity and provokes pressure for exchange rates.
The market critics often blame the second largest cryptocurrency Ethereum (ETH). The rapid growth in the number of ICOs, most of which were conducted on Ethereum basis, turned market participants against the cryptocurrency market. This puts the current successful projects in hurry to withdraw (or cash in) gathered coins due to unstable price.
Miners also aim to sell much of their coins, albeit inflow of the new investors is very limited now. The industry veterans try to wait out the losses or turn into long-term investors. From this point of view, the market is in a deep depression and we might be looking at a mass-scaled liquidation of both the investments and the mining capacities.

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More short-term technical analysis, however, shows a slightly more optimistic picture. BTC successfully fought off bears’ attack and managed to stay above $6000. Cautious purchases have returned the benchmark cryptocurrency to $6500 mark and are causing its growth for the third day in a row. Despite the depressive market condition investors prefer to buy dip Bitcoin, and this is definitely a good sign. The growth in trade volumes in periods of strengthening also confirms positive mood among the market participants.

This article was written by FxPro

Markets are on the Rise due to Turkey and China Positive News, US Markets Open Higher

Markets are on the rise on Thursday morning on the news about the U.S.-China trade talks later this month. As a result, Asian bourses have stabilized: MSCI adds 0.3% after a decrease of 1.1% on Wednesday. The Chinese offshore yuan adds about 1% on Thursday morning and trades at 6.875 after reaching 18-month lows to the dollar overnight. The central bank of Turkey decided not to raise the key rates but had limited the possibility of a speculative attack on the lira. As a result, its course rose by 19% to 5.85 per dollar against the 7.24 at the start of trading on Monday.

Thus, the markets have received hope for stabilization of two most sensitive issues for the latest days, on Turkey and China. In both cases, the situation is far from being resolved, but the attention of the authorities to the topic and attempts to stabilize the situation, deter markets from further decline, allowing speculators to fix a part of the profits from the recent strong moves.

The mood for profit-taking has also spread to major currency pairs. The dollar index has decreased by 0.6% from the highs of the Wednesday and is trading near 96.50. The EURUSD pair gained on support on the decline to 1.13, adding almost a figure (1 cent) to the lows of the previous day, and is trading at 1.1360 before Europe open. In case of development of a rollback in a pair, it is necessary to pay attention to dynamics near 1.15 which until recently was an important support level. Strong growth above this mark gives a signal about the serious intentions of the Euro-bulls and can become a testament to the end of the impulsive sale-off. However, by now we could hardly talk about serious chances to reverse in the euro dynamics.

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Still, there is a lot of evidence of the growing strength of the dollar. The volatility of the Turkish lira, although capable of worsening the positions of European banks, affecting on lending and possibly containing the ECB on the way to normalize rates.

Moreover, we have strong statistics from the United States. Yesterday’s retail sales were marked by an increase of 0.5% m/m and by 6.4% y/y, which significantly surpasses the rate of price growth, which is 2.9% y/y.

Brent Crude Oil fell on Wednesday to $70.50, updating the 4-month lows, but later have stabilized around the $71.30. Oil fell by 2.3% yesterday after reports of unexpected growth in inventories and production in the US last week. Crude oil inventories declined by 11% to last year’s levels, but it is almost half the rate of March when the fall to the last year was 20.6%. Despite the short-term stabilization of the price, it is worth noting the dominance of the downward trend. An important technical indicator for observation is the line of 200-day average, which passes near $70 per barrel. Overcoming this mark can serve as a signal to a prolonged sale.

This article was written by FxPro

Global Stocks Fall as Turkey Worries Weigh; US Futures Set to Open Lower, Dollar Updates Its 13-Month Highs

The strengthening of financial markets on Tuesday has not been unsustainable and prolonged. Recent shots in the U.S. trade conflicts are: a China’s claim to the WTO about US tariffs on renewable energy imports and subsidies to their own producers; Turkey has put obstruction duties on a number of goods from the United States, including passenger cars, and has announced a boycott of American electronics.

On Wednesday morning, the markets are again under pressure on new episodes of U.S. trade conflicts. Again, at the epicenter of the fall are the Asian exchanges as MSCI lost 0.8% and Hong Kong’s Hang Seng fell by 1%.

At the same time, we saw almost an uninterrupted demand for dollars in the currency market. Despite yesterday’s rollback at the stock exchanges, the U.S. currency continued to strengthen its main competitors. The dollar index added 0.4% on Tuesday and continues strengthening on Wednesday morning adding another 0.1% and trading at the level of 14-month highs.

EURUSD sank to 1.1320 in the morning, having lost more than 2.5% over the past week when the pair traded above 1.1600. The sales in pairs intensified after the exit from the trading range since May on fears around the stability of the eurozone banking sector against the backdrop of Turkey’s problems. Cravings in dollars can be saved for the next few days against the wave of stop-orders. The goals of bears in EURUSD pair in the course of the current impulse decline may become 1.1150, the levels of previous local lows. The longer-term targets for the next months could become the levels around 1.04, at which the pair had traded in early 2017.

Sterling also continues its falling, dropping to 1.2700 on Wednesday morning. Here the nearest local lows are the levels of 1.2630, the capture of which opens the way to 1.21 – to the global lows after Brexit.

The gold is keeping its way down. In the morning, it rewrote the lows of January 2017, dropping to $1186 per ounce. Amid the growth of the dollar and the fears of problems in key consumer markets for this metal (China, Turkey), the gold has yet sought support unsuccessfully.

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Since the situation with trade and diplomatic conflicts between the United States and other countries is far from being resolved and is only gaining momentum, the craving for dollars can also be intensified. Perhaps, the most significant risk for the dollar may be another verbal intervention of Trump against the strengthening of the dollar. It is impossible to exclude changes in the rhetoric of the Fed policymakers. In previous years, weakening in the foreign markets forced FOMC under chair Yellen to review its plans for the tightening the policy. We have to see if the Fed’s views would be reconsidered under Powell’s administration.

This article was written by FxPro

Cryptocurrencies Crash Continues; Bitcoin’s Bulletproof Bottom at $6000?

The cryptocurrency market has started the current week with an impressive decline. The total market cap fell by 12% to $ 192 billion a day, which is less than 25% of the peak market volume at the beginning of the year. The Bitcoin once again came to the threshold level at $6000 losing more than 6% in the past 24 hours.

The leading altcoins show a two-digits sell-off: Ethereum (ETH) has lost more than 17%, XRP fell by 14.5%, Cardano (ADA) and IOTA (IOT) have plummeted more than any other major cryptocurrency by almost 20%.

As we take a look at the BTC chart for this year, we can see that the cryptocurrency showed lower lows and lower highs until the BTC level reached the current mark somewhat below $6000, which seems a strong support level.

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$6000 mark could become the solid support with possible reverse

From a technical analysis perspective, the situation looks ambiguous. The Bitcoin returned to the area of its lows where it received support in February, March-April, and June. Another rebound from this area could start a significant rally, having established as a bulletproof bottom.

The RSI index also came out of the oversold levels, which often increases the chances for a rebound. Despite the weakness of the market, this scenario looks the most plausible at the moment.

Alternatively, the drawdown lower than the previous levels near $5800 could give an impulse for a new sell-off wave. In this case, BTC would expect a decline to $3300 level due to a significant liquidation of long positions.

Volatility in the traditional markets does not cause the demand for cryptocurrencies, as it was a year ago, despite the twofold increase in trade volumes on the Turkish exchanges. In general, the world becomes a witness of a massive diminishing of the interest in cryptocurrencies.

This article was written by FxPro

Profit-Taking after Big Sell-Off Helps Markets on Tuesday, Turkish Lira Recovers on Turkey’s Central Bank Interference

There is a demand for profit-taking in the markets after powerful movements at the end of last week and a very aggressive trading start of the week. On Monday afternoon there was a cautious demand for some risky assets, as investors considered recent sell-off has gone too far. However, investors should be cautious. The key problems that have caused pressure in the markets are still unresolved, which means that a new wave of flight from risks is likely to be in the near future.

EURUSD is trading near the closing levels of Friday in the area of 1.1400 after the fall at the start of Monday down to 1.1360. The South African Rand (ZAR) has almost completely recovered its losses after a sliding by 10% early in the day on Monday. The Turkish lira has stabilized near 6.5 per dollar after the country’s central bank had announced the measures to maintain liquidity. This morning the course remains near the yesterday’s levels and thus, allows hoping for some respite in updating the historical highs. The interventions of the Central Bank of India and Indonesia played its calming role for the Emerging Markets.

It may also be expected that EM countries will increase their rates in order to protect against capital outflows, despite the risks of economic slowdown.

And yet it should be noted that the risks of further tension growth remain possible in the markets. The key problems remain unresolved: the diplomatic conflict between the United States and Turkey does not wane, with Erdogan’s statements on Friday only have added fuel to the fire. The trade dispute between the USA and China has not led anywhere yet, and the latest data has already indicated the slowdown of the 2nd world economy as a result of the earlier imposed sanctions.

Markets can get a respite from the rally today or for a few days at best, but the worst is still ahead as we could see the sale-off on stock and bonds markets, which often happens with some lag after the speculative currency moves.

On the commodity markets, there also were some big movements on Monday. OPEC’s forecast update caused oil collapse by more than 2% to $71.17 per barrel Brent, the lowest rate since April this year. The reason was the decreased expectations of the demand growth and the estimation, that the countries outside OPEC increase production faster than the demand grows. The issue of oil supply surplus is becoming relevant once again. This is bad news for OPEC, whose market share has declined in recent years from the usual 40% to 32%, and the stabilization of supply requires even bigger reduction. Just one month after the increase in quotes, it looks unlikely that the cartel would lower them once again.

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The gold fell below the $1200 per ounce against the backdrop of the weakening of currencies, which are ones of the main precious metal consumers (China, India, Turkey). Nevertheless, the prospects of further gold weakening look limited. For developing countries, the gold can be a good politically neutral means of saving the capital before the threat of the increasing inflation.

This article was written by FxPro

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