News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
Wall Street
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • Trading bias allows traders to make informative decisions when dealing in the market. This relates to both novice and experienced traders alike. Start learning how you may be able to make more informed decisions here: https://t.co/rz7fqhRoMG https://t.co/lccPTTlvj0
  • GBP/USD’s consolidation could end soon if price breaks out of a symmetrical triangle in play since July. At this time, a downside breakout is likely following the appearance of a death cross. Get your weekly $GBP forecast from @DColmanFX here: https://t.co/WIKdSesfkJ https://t.co/Fx0qr32xgI
  • Greed is a natural human emotion that affects individuals to varying degrees. Unfortunately, when viewed in the context of trading, greed has proven to be a hindrance more often than it has assisted traders. Learn how to control greed in trading here: https://t.co/kODPAfJE79 https://t.co/IRS9MaA7h8
  • The Federal Reserve rate decision is likely to sway the near-term outlook for the price of gold as the central bank appears to be on track to scale back monetary support. Get your weekly gold forecast from @DavidJSong here: https://www.dailyfx.com/forex/fundamental/forecast/weekly/CHF/2021/09/18/Gold-Price-Outlook-Hinges-on-Fed-Rate-Decision-Forward-Guidance.html https://t.co/dWWxtErjK0
  • Forex liquidity makes it easy for traders to sell and buy currencies without delay, and also creates tight spreads for favorable quotes. Low costs and large scope to various markets make it the most frequently traded market in the world. Learn more here: https://t.co/arxYmtQeUn https://t.co/4qxwiJsV1K
  • Forex quotes reflect the price of different currencies at any point in time. Since a trader’s profit or loss is determined by movements in price, it is essential to develop a sound understanding of how to read currency pairs. Learn how to read quotes here: https://t.co/CNtqrKWDBY https://t.co/stMPuq0VXR
  • A currency carry trade involves borrowing a low-yielding currency in order to buy a higher yielding currency in an attempt to profit from the interest rate differential. Find out if the carry trade suits your trading style here: https://t.co/7t4BzmLg8w https://t.co/v6RGICQvge
  • Get your snapshot update of the of top level exchanges and key index performance from around the globe here: https://t.co/d8Re5anlG5 https://t.co/rws9LHJV3E
  • RT @FxWestwater: Japanese Yen Forecast: JPY Crosses Eye BoJ, CPI as Haven Flows Bolster Yen Strength Link: https://www.dailyfx.com/forex/fundamental/forecast/weekly/jpy/2021/09/18/Japanese-Yen-Forecast-JPY-Crosses-Eye-BoJ-CPI-as-Haven-Flows-Bolster-Yen-Strength.html?CHID=9&QPID=917708&utm_source=Twitter&utm_medium=Westwater&utm_campaign=twr https:/…
  • Traders utilize varying time frames to speculate in the forex market. The two most common are long- and short-term-time frames which transmits through to trend and trigger charts. Learn more about time-frame analysis here: https://t.co/9S5tXIs3SX https://t.co/FVisZuTP6M
US Dollar Turnaround Sparked by EM FX Tantrum

US Dollar Turnaround Sparked by EM FX Tantrum

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- The BRATS - Brazil, Russia, Argentina, Turkey, and South Africa - have all seen their currencies slump by at least -8% in August.

- Concerns over trade wars, lower expectations for global growth, and the withdrawal of central bank stimulus have fed concerns over the stability of emerging market currencies.

- Issues in Argentina, Turkey, and South Africa likely to persist through September.

See our longer-term forecasts for the US Dollar, Euro, British Pound and more with the DailyFX Trading Guides

The US Dollar (via the DXY Index) is posting a modest turnaround on Thursday, once again driven by factors away from its shores. A shallow pullback by equity markets is helping the dollar post only its second gain in the past ten sessions, as it continues to behave as a quintessential safe haven currency (rallying when stocks fall, falling when stocks rally).

Although US economic data this week has remained positive - earlier today, the August US Core PCE reading showed the Fed's preferred gauge of inflation back at its +2% medium-term target for the first time since April 2012 - the US Dollar rally has nothing to do with the Federal Reserve's rate hike timeline. There is a strong argument to be made that US Dollar price action since mid-June has been largely disconnected from speculation on the Fed's rate hike timeline.

DXY Index Price Chart: Daily Timeframe (January to August 2018) (Chart 1)

US Dollar Turnaround Sparked by EM FX Tantrum

Instead, as was the case driving the US Dollar's early-August surge, the major factor today is the revival of concerns over emerging markets, particularly among those that share some less-than-appealing qualities: high inflation, elevated external debt-to-GDP ratios, current account deficits, and/or political instability are (among others) the hallmarks of a currency on the verge of facing a crisis. Enter the BRATS.

Like the European PIIGS, the emerging market BRATS are those countries that share the aforementioned qualities that put their currencies on the path to crisis. Whatever calm may have transpired in recent weeks was seemingly wiped out today with several key developments:

- the Argentinian Peso is now down nearly -30% month-to-date after Argentinian President Mauricio Macro asked the IMF to release $50 billion in loans, followed up by the central bank raising its key rate to 60% (the Fed's key rate is 2-2.25%, for comparison)

- the Turkish Lira is now down over -26% month-to-date after reports emerged that the central bank's deputy governor, Erkan Kilimci, would be leaving his post, a sign that the government is taking more steps to tighten its grip on monetary policy (markets prefer central banks independent of political considerations)

- the South African Rand is now down over -10% month-to-date after a goverment spokesperson said that the government could "collapse" if reforms are not taken up at a fast enough pace

Performance of BRATS versus US Dollar (Table 1)

US Dollar Turnaround Sparked by EM FX Tantrum

There are two key takeaways from today's price action. First, the mid-month calm that we saw in emerging market FX was misleading; volatility is indeed here to stay. Second, the longer these emerging market currencies stay weak, the greater the likelihood of crises developing down the road. At the current exchange rates (particularly for USD/ARS and USD/TRY), it's only a matter of time before defaults occur and financial insitutions start eating losses - fully expect focus to remain on emerging markets throughout September.

Accordingly, we should learn soon as to whether or not the European Central Bank will be forced to alter its preordained policy path (ending QE in December 2018, hiking rates by "summer 2019") in order to help shore up an overly-exposed European banking system, or if the Fed will back off its current plans for gradual rate hikes over the next year (25-bps hikes priced-in for September 2018, December 2018, and June 2019).

Read more: USD/TRY Sustains Incredible Gains - What EM Currency Could Be Next?

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES