Earn2Trade’s Daily Market Analysis June 25, 2018

Turkish Elections

Tayyip Erdogan scored an overwhelming victory in this weekend’s Turkish elections. His re-election means he’ll be the President of Turkey for another 5 years. His party, the AKP took 42.5% of the vote while their ally the hyper-nationalist MHP received 11.1%, giving the coalition over 50% of the parliament. In the wake of the election, the Turkish lira turned around its downwards trend of the past few weeks and is now strengthening. Last week it was at 4.77 against the USD, however today it was traded at 4.54. This 5% increase shows that pricing out the intensity of the elections resulted in a more reasonable USDTRY exchange rate. In his victory speech, Erdogan promised he’ll elevate Turkey to be part of the world’s top 10 economies.

China Loosens up

The People’s Bank of China reduced their reserve ratio by 0.5%. The measure will free up 700 billion yuans worth of capital for Chinese banks to immediately invest into the economy. Despite the news, the Shanghai Composite still declined as did the Nikkei and the Hang Seng. The reason could be the rumours that the US is planning further economic sanctions against China. Meanwhile the currency market was lively due to the Japanese yen strengthening by 0.5%.

Light Sweet Crude Oil

This Sunday, Russia and OPEC agreed to extend their mutual cooperation to 2019. As per their arrangement Russia will increase their daily production by 200 thousand barrels a day. Russia initially proposed increasing combined production between Russia and OPEC by 1.5 million barrels, however OPEC only supported an expansion of one million barrels. The underlying reason was that only Saudi-Arabia has the capacity to significantly increase their production in the short run, which would lead to an imbalance between member states. The result was lower production and higher uncertainty, since there were no exact quotas set for most participants. Traders and investors were hoping for the meeting to conclude in a definite direction for the price of oil, however the final result ended up being rather ambiguous. The invisible hand of the market punished this lack of decisiveness by lowering the price of WTI from $69.38 to $68.55 on Monday morning.

The increased volatility caused Bollinger Bands to expand substantially, opening up price to much broader range of movement. The likely break out point was located at $67.17, which is also the current center line of the Bollinger Bands. Price has now left the trendline it has been moving along for the past several days. When price goes above the upper band, it has a tendency to correct back to the center line as seen on the chart. The yellow trendline parallel to the moving average should serve as a natural boundary for this correction. The current direction of trading fundamentally displays strong buying power, however the vague OPEC announcements caused some uncertainty on the market. That could lead to the trendline being retested. Under current circumstances, the resulting price drop could find support between the $68.37 and $67.90 range.


The Australian dollar regained some of its former vigor near the end of last week, presumably in part due to the sudden surge of oil prices. The Aussie dollar has long been known as a commodity currency so strengthening in response to oil is no surprise. The increase was preceded and predicted by a double bottom pattern. Price bounced back from 0.7348 and breached the 20 candle moving average with some resistance. It also managed to stay above the moving average consistently, which has not happened since June 7. This is considered a reliable indicator for an upwards trend, giving more credibility to suggestions that price will continue to rise.

We can use the Fibonacci tool to help us map potential price movements. It’s also important to add the 0.7414 line, as it serves as a persistent level of both support and resistance despite not being located at a notable retracement level. The AUD successfully breached this line as well as the subsequent 25% Fibonacci retracement level. Afterwards it lost momentum and retested the 0.7414 line unsuccessfully. Such strong lines can serve as a solid basis for determining price direction. We can assume it’s an upwards trend as long as price is above the line or a downwards trend if it falls below it. Price is currently above the line so traders planning to take a buy position should consider 0.7472 the next strong line of resistance.

Laszlo | Market Analyst

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