Today’s Key Market Drivers: 14th August 2018
“CNBC warns of a widening Turkish crisis.”
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The current Turkish Lira crisis is beginning to have wider implications for emerging market currencies with many falling sharply through the European and US trading sessions on Monday. With a crisis of this nature facing Turkey, we are not going to see traders get overly optimistic about buying stocks or traditional risk-on currencies such as the Aussie and Kiwi Dollars. Trump has put in place tariffs on Turkish steel imports in retaliation for the Turks imprisoning a US pastor who is accused of supporting an opposition group who were rumoured to be about to attempt a coup against the Turkish Government. Monday saw markets whip saw back and forth, mostly back as traders tried to come to some logical conclusion on whether or not a deal can be reached with the Turks for the release of the Pastor in return for lighter tariffs. The probability in my view is the Turks don’t have a choice and Trumps going to push them into a corner and exert more and more pressure until he gets what he wants and when the Pastor is released we will likely see a relief rally. I want to warn you that the market right now is overcrowded so do not fall in love with being short with lots of volume. When we see consecutive days of selling pressure like we have we often get a huge portion of the market positioned in one direction. When the good news is finally released we see what’s called “short covering” meaning traders who are short exit their positions very quickly and due to the lack of sellers (everyone now wants to buy) the market shoots up very quickly. The late comers to the party with loads of volume and trading without a plan or stop loss get slaughtered. You’ve been warned.
The risk-off mood on financial markets since Friday last week is helping push higher the traditional safe-haven currencies such as the Yen, Swiss Franc and US Dollar. Emerging market currencies along with the Aussie and Kiwi Dollars have fallen sharply against the safe havens with the AUD v CHF at a 12-month low and the South African Rand falling by 10% against the US Dollar. So, is the negative trend likely to continue through the Asian trading session today? Until we see some positive news we must assume it will, however, I don’t think the selling pressure will be as severe on Tuesday unless something new surfaces or Trump decides to release another Tweet threatening the Turks. Turkey is in serious trouble right now, inflation is running at 16% and the Turkish Central Bank is going to need to print truckloads of Lira to support the economy which isn’t going to help those who trade internationally and rely on paying in Turkish Lira.
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The market remains bearish for now and today’s economic calendar shows German and Euro Zone GDP as high impacting data numbers to be released through the European trading session. The latest UK weekly earnings and unemployment data is also set for release as well as an economic sentiment survey for Europe. None of this news, in my opinion, is going to take the focus away from the market wanting to see some more definitive news on what’s happing with the US Pastor being held in detention and when will Trump Tweet again about his next Turkey move.
I have two currency pairs I am continuing to watch closely that are now trending in a new direction and I point them out in today’s video report as potential price rejection trades later this week.
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About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
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