Today’s Key Market Drivers: 15th August 2018
“This crisis is not over.”
As I expected the selling pressure was not as heavy on Tuesday, however, most markets remained nervous with Asian, European and US stock indexes all finishing mixed. The surging Yen that was benefiting from the risk-off mood following the crash of the Turkish Lira weakened a little but I don’t believe the low on the Lira is in yet and the selling pressure will likely resume. Yesterday I talked about the potential for a “short squeeze” where traders exit an overcrowded short market and price jumps back higher quickly. We saw some of that happen on Tuesday on some currency pairs and stock indexes did jump but it wasn’t a substantial short squeeze that will change the sentiment back positive. I am not buying into the one-day semi-relief rally and believe this recent sell-off could be a sign of a looming larger move lower on global stock indexes and a move higher on safe-haven currencies such as the Yen and US Dollar. Take the trading move on the Aussie Dollar v US Dollar as an example. It usually rallies strongly on any relief rally and Tuesday’s US trading session has seen it hit another 2 year low of 0.7223. The Aussie and Kiwi Dollars are exposed to emerging market currencies and that includes the Lira.
The Euro continues to remain under pressure due to the exposure that European Banks may have to the current economic and currency crisis in Turkey. The Lira did bounce back 7% on Tuesday but it’s economic and political stability continues to concern traders. When we see such a sell-off in a currency, particularly a currency such as the Turkish Lira, we are likely going to see another low created before any sustained rally happens. So many traders will be trying to catch a falling knifes right now buying the Lira thinking they can get a bounce and there will be substantial liquidity just below the recent lows (stop losses) that investment banks and hedge funds may target in coming days.
Please ensure you review my daily video update as the CAD v JPY and USD v JPY have moved higher into a position where potential short entries may trigger in coming days.
The economic data that was released on Tuesday as I expected had no lasting impact on any of the currencies it related too as the focus still remains on the Turkey crisis with trading now questioning what the knock-on effects may be. UK CPI is due for release Wednesday along with US Retail Sales.
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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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