Amid the sell-off of the Turkish Lira, the US Dollar was one of the strongest performing currencies, with the US Dollar Index (USDX) rising to a new one year high as it closed up by 0.77%. Only the most stable currencies, such as the Japanese Yen (JPY) and Swiss France (CHF) traded moderately stronger compared to the Dollar. On the other hand emerging markets currencies such as the Mexican Peso (MXN) and Russian Ruble (RUB) significantly declined in this environment, while the South African Rand (ZAR) briefly spiked towards a 13-months low marking a fall by more than 10 percent at its lowest point compared to last week.
Despite the turmoil in the global markets, the demand for gold as safe haven was not enough to push its price higher, as it remained close to the recent lows. The strong Dollar can in theory negatively affect gold prices as in that case gold becomes more expensive for holders of non-Dollar currencies.
Equities traded across the board lower on Friday, with index futures extending losses early on Monday over uncertainty what the situation with Turkey would mean for other affected markets. There are fears that some banks like the Italian UniCredit and the French BNP Paribas (PA:BNPP), which have exposure to the Turkish market could lead to instability in other markets, such as the Euro zone.
Bitcoin was able to recover from its low at around $6,000 on Saturday and push higher, while other major cryptocurrencies, such as Ripple and Ethereum were unable to follow that move and further declined to their lowest levels in 2018.
On Monday in Italy the CPI data is due for release. In the Asian-Pacific trading session on Tuesday China will release its Industrial Production and Retail Sales numbers.
The Turkish Lira fell to a new all-time low when opening after the weekend trading break. While the Lira appears to be in an unending downwards spiral losing as much as half its value compared to one year ago, the Turkish President Erdogan stood defiant and used his authority over the monetary policy to reiterate that interest rates would not be increased, blaming financial markets and the US for the crisis. Market commentators appeared to be astonished that the US doubled down on Turkey by increasing tariff rates on steel and aluminum, allegedly to offset the new advantage of low Lira rates, while normally it is expected that major economies would try to take measures to ease such adverse conditions.
The Turkish Central Bank moved to add support to Turkish banks by providing additional liquidity measures.
On Wednesday in Turkey data on Jobless numbers and the Budget balance level for July will be released. Then on Thursday data on Industrial Production and on Friday Consumer Confidence and the Consumer Price Index Forecast will be released.
Pivot:6.6459Support:6.64596.43896.3157Resistance:7.24447.36887.4931Scenario 1:as long as 6.6459 is support look for 7.2444.Scenario 2:below 6.6459, expect 6.4389 and 6.3157.Comment:the RSI is above its neutrality area at 50. The MACD is below its signal line and positive. The pair could retrace. Moreover, the pair is trading under its 20 MA (6.9096) but above its 50 MA (6.4913).
WTI Oil
Despite the shock to the markets by the severe devaluation of the Lira and subsequent pressure on equities, oil managed to close higher on Friday.
Analysts attributed the gains to increased fears that global supplies will drop, following the implementation of US sanctions against Iranian oil exports as of November this year. The International Energy Agency (IEA) increased its estimates for oil demand for 2019 from 1.4 million barrels per day (bpd) to 1.5 million bpd. Furthermore a drop in Iranian oil output was reported, as many countries reducing their imports from Iran and South Korea stopping them altogether.
It is noteworthy that while oil traded higher on Friday, the US Baker Hughes Oil Rig Count reported the highest number in operating oil rigs in more than three years as 869 oil rigs were reportedly in operation (previously 859).
On Tuesday the American Petroleum Institute (API) will release oil stockpile figures, followed by the Energy Information Administration (EIA) on Wednesday.
Pivot:67.1Support:67.166.566.1Resistance:6868.669Scenario 1:long positions above 67.10 with targets at 68.00 & 68.60 in extension.Scenario 2:below 67.10 look for further downside with 66.50 & 66.10 as targets.Comment:the RSI is mixed with a bullish bias.
Tesla (NASDAQ:TSLA)
While Tesla (+1.02%) closed moderately higher on Friday, pressure is increasing on the company and in particular its outspoken CEO Elon Musk. After Musk used Twitter messages last Tuesday to unexpectedly announce that he would take the company private and that he had “funding secured” for this move, analysts are increasingly questioning this.
It was reported that as of Thursday the board of Tesla did not had any particular financial information about such a deal from its CEO. Speculations on who would be financing such a deal are increasing as Softbank is said not to be interested in such a deal. It was reported that Saudi Arabia’s Public Investment Fund is in talks with the company over a participation in such a move, but concrete details could not yet be established.
Pivot:325Support:325289268Resistance:433455477Scenario 1:the upside prevails as long as 325 is support.Scenario 2:below 325, expect 289 and 268.Comment:the RSI is above its neutrality area at 50. The MACD is above its signal line and positive. The configuration is positive. Moreover, the stock is above its 20 and 50 day MA (respectively at 322.74 and 326.55).
US 500
The global implications of the Turkish currency crisis pushed equities overall lower in many markets over fears of financial contagion. While in the US inflation as on target, with the Core CPI even higher than expected at +2.4% y/y (expected +2.3%), the Treasury Budget deficit unexpectedly rose to $76.9 bn. (expected $73.5 bn.).
Financial (US Financials ETF -1.17%) and chip makers’ (US Semiconductors ETF -2.28%) stocks were overall some of the worst performing values on Friday as the market turned lower.
Dropbox (-9.94%) continued to show erratic moves as the move down came just after the stock gained over 9% in a single day on Thursday. The fall was attributed to the exit of the company’s Chief Operating Officer and came despite the company posting better than expected revenue and earnings for the second quarter.
The weakness in chip stocks came with losses in many stocks of the sector on Friday, such as Cypress Semiconductors (-5.54%), Intel (NASDAQ:INTC) (-2.55%) and Texas Instruments (NASDAQ:TXN) (3.37%).
The earnings season is coming towards its end, but still this week key companies such as Nvidia, Walmart (NYSE:WMT) and Cisco are due to release their quarterly earnings results.
Pivot: 2839.5 Support: 2810 2800 2791 Resistance: 2839.5 2848 2855 Scenario 1: short positions below 2839.50 with targets at 2810.00 & 2800.00 in extension. Scenario 2: above 2839.50 look for further upside with 2848.00 & 2855.00 as targets. Comment: the RSI is capped by a bearish trend line. The declining 20-period moving average should push the prices lower.