Qatari Relief
While the United States have made it clear that they would not provide any sort of help to alleviate the financial crisis in Turkey, Qatar is helping the troubled nation with a 15-billion dollar investment package. Washington demanded the release of the imprisoned American pastor in exchange for an ease of the trade sanctions. The United States continues to maintain a hard stance, but the European Union has taken a softer approach with Turkey, especially since the release of two Greek soldiers by the Turkish court. The overall positive nature of the events have resulted in a stronger Turkish lira against the USD. The current 5.7 rate is 25% lower than the recent high of 7. The support coming from Qatar has provided some air to Erdogan and the Turkish economy.
Beijing Negotiations
Sources from Beijing have confirmed that there will be another round of trade negotiations between China and the United States before the end of August. This hopeful news had enough impact on traders to turn a day of free falling markets into a merely slightly bearish one. Even though the reports are not about growth at the moment, the rate of decrease went from over 1.5% to about 0.7%. Australia and Japan managed to close at about 0. Sales on the commodities market decreased also, with copper and silver showing an increase in prices. Gold, however is continuing its fall, this time decreasing by about $3 during the Asian session. At $1182 it is the lowest it has been since January, 2017. WTI dipped below $65 as well yesterday, the lowest since mid-June.
AUDUSD
The Australian labor market data released today paints a mixed picture of the nation’s employment situation. While employment numbers decreased slightly, the rate of unemployment also decreased to 5.3%. This is due to the structural change taking place in the ratio of full-time and part-time employment figures. The rate of part-time employment decreased significantly (by 23.000) while that of full-time employment increased by 19.300. These July numbers were unexpected, considering this year’s tendency of an increasing part-time workforce. More significant is the inflation expectation hike of the consumer base. August data shows that it is already at 4%, whereas official data shows a price increase of about 2%.
Following the release of macro data, the Aussie only had enough enthusiasm to show a limited spike. Its depreciation against the USD is still steep. Since the 0.7347 support that failed to hold on Friday, yesterday has been the first day to show an increase. That momentum quickly found a resistance at 0.7280 which stopped the Australian currency in its tracks. This pair is most likely to remain between the 0.7207 and 0.7280 today. No groundbreaking news is expected from the United States and the AUD’s momentum has quickly exhausted - sideways markets and consolidated prices will be the themes of the upcoming days.
EURUSD
Neither the Fed nor president Trump have been able to find a way to slow the appreciation of the USD. Though it has been a weekly announcement that a strong USD is bad for the American economy, the rigid monetary trajectory gives the US no leeway, much like a similar constraint is doing the same to the European Central Bank (ECB). The ECB needs to keep the interest rates low, since the European GDP data show no sign of being overheated. At the same time, the Fed’s main motivation must be constraining the inflation rate. These factors suggest a decrease in the EURUSD price.
There might be temporary upticks shown by the EUR, but until the underlying structure changes, the general direction of trading will be downward. When a trend is revealed so clearly for the participants, momentum traders tend to gain control, with the strategy of putting sell orders in at the upward swings. For this strategy to work, careful entry point selection is necessary. The charts show three good entry levels. The first is at the 1.1428 resistance, which has successfully turned back the EUR gains at their early stages three times. The second is the 200 MA, which can not be tied to one certain level, but at the moment it is above the primary resistance. The third is the green trendline, which might signify a steeper, long term fall.
Sincerely,
Laszlo | Market Analyst
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