Geopolitics will probably remain in focus this week, as the currency crisis in Turkey is still ongoing.
The collapse of the Turkish lira is in the memory of traders, as the fear of contagion in the eurozone is likely to remain a dominant theme. It was reported that emerging market funds cut off their exposure to the country already in July, even before the severe fall of the lira. Over the weekend, the central banks of Qatar and Turkey signed a currency swap agreement, and this follows the $ 15 billion that the Gulf State promised to invest in the country.
Moody & # 39; s and S & P 500 have lowered the rating of Turkey, and this is important in view of the fact that international investors are less inclined to lend to the struggling country. It could also lead to individual Turkish banks being downgraded, and that would further enhance investor confidence. Distributors are still worried that banks that have lent money to Turkish financial houses may face defaults, and it is possible that we see an increase – financing loans in the Turkish banking system, and that could enter the euro zone.
Trade negotiations between the US and China have to be resumed this month, and traders are cautiously optimistic, but only because the meeting is queued does not mean that anything comes of it. Some traders see the weakness on the Chinese stock market and currency as a sign that Beijing will be more lenient when it comes to negotiations. President Trump will feel that he has the upper hand, especially in light of China's disappointing economic updates last week, so he might try to find the limits when it comes to the terms of the trade agreement. China is the second largest economy in the world and a major importer of metals, and copper, platinum and palladium will be in the spotlight this week. The renminbi is a bit firmer at night, and this is a good omen for China.
The US dollar index closed on a negative note last week, as traders locked the profit from the greenback's positive run. The possibility of another two rate hikes by the Federal Reserve this year keeps the dollar in question. The fact that the US economy stands head and shoulders above other major economies is another factor, and there is also a bit of a safe haven. The situation in Turkey is putting other emerging market economies under pressure, as loans in the US are equal to higher financing costs.
gold had a heavy sale last week when the stronger US dollar weighed on the metal. Some traders are of the opinion that the US central bank will raise interest rates in September and December, and this hurts the gold market. The reverse relationship between gold and the greenback is strong, and it makes the flight-to-quality effect that gold has had in the past too heavy. According to the Commodity Future Trading Commission, the bearish bets on speculators' gold have reached their highest level in 17 years.
At 7.00 am (UK time) Germany will publish the latest PPI report and on an annual basis the report will be tipped at 3%, unchanged from June, and on a monthly basis the consensus is 0.2%. The PPI update is useful because it is often a front-runner for the CPI report, because price changes at producer level can be passed on to the consumer.
EUR / USD – now that it has broken down under the 1.1500 region, we can observe further losses. Support can be found at 1.1287 or 1.1156. A springback can experience resistance to 1.1500 or 1.1663 resistance.
GBP / USD – has been on a declining trend since April and if the bearish movement continues, it could focus on 1.2590. Pullbacks can encounter resistance in the region from 1,2957 to 1,3000.
EUR / GBP – has been pushing higher since April and if the bullish run continues, it could reach 0.9050. A lower movement can find support at 0.8900 or 0.8844.
USD / JPY – the upward trend that started in March is still intact and if the positive move continues, it can focus on 112.15. Support can be found at 109.88 – the 200-day moving average.
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