Today’s Key Market Drivers: 16th August 2018
“If China is slowing the AUD v USD is headed for 0.50c.””
The relief rally was short lived and the selling pressure returned on Wednesday through the European and US trading sessions as traders continue to remain concerned at the knock-on effect the Turkish currency and economic crisis may have for the wider Euro area. Turkish regulators have now put a limit on local currency transactions in a bid to curb the amount of Lira being exchanged for currencies such as the US Dollar and Euro. It is simply another sign of desperation.
CNBC reports today that emerging market currency ETF’s are now in bear market territory as a result of the Turkish Lira’s crash. Think of an ETF like a share where you can buy a position and speculate that emerging market currencies are going to rise as a group. Buying an emerging market currency ETF is similar to taking a long position on a stock index but on a group of currencies. Emerging Market currencies are going to continue to come under pressure and I will continue to advise you that this also means the AUD and NZD. Yes, Australia and New Zealand have developed economies and are not technically emerging markets, however, both countries rely heavily on emerging markets to buy their goods and services with Asia being their biggest export market. With interest rates set to stay on hold in Australia and New Zealand for the next 12 months and US interest rates along with the UK and Canada going to rise there is zero reason why big money investors would park money in Australia. China’s growth is now also being questioned and if the market buys into the story that China may see slowing growth in the coming 2 years then the AUD v USD is headed back to 0.50c. In my opinion, this is a very real probability based on the current fundamentals.
Risk currencies such as the Yen and US Dollar rallied strongly on Wednesday as stock markets turned bearish once again and the Aussie Dollar and any currency linked to commodities were hit hard as Copper prices fell sharply. The AUD v USD touched another two-year low of 0.72c with the phycological 0.70c price target now only 200 pips away.
We need to be mindful of the short CHF v JPY trade as there is the potential for a long head and shoulders forming on the 4 hour which I step you through in today’s video update. If this was to confirm then I would exit my short CHF v JPY and get long. There is plenty of water to pass under the bridge before this occurs and I will let you know on the Trade Time App.
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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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