Emerging market currencies keep tumbling

Daily Analysis - 05/09/2018

U.S. equity indexes retraced while investors came back from the U.S. holiday

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Yesterday U.S. equity indexes retraced while investors came back from the U.S. holiday week-end. Investors showed their sell appetite early as the board went from green to red for a while. Price action was mainly driven by the U.S. moves to resolve the issues with Canada, but also from the trade tensions with the European Union and China. U.S. and Canada Last week failed to form an agreement but talks are probably to resume today. On the other hand the United States President Trump said more or less that the US does not need Canada on a political level to join the deal. President Trump tweeted over the week-end that there was no “political necessity to keep Canada in the new NAFTA deal.”

Saudi Arabia will try to keep crude between $70 to $80


Saudi Arabia will try to keep between $70 and $80 a barrel for now. It’s actually the world's biggest crude exporter and it will try to balance between maximizing revenue and keeping the price at a stable level up to the moment U.S. congressional elections, OPEC and industry sources said. After announcing the flotation of Saudi Aramco in 2016, they started pushing for higher crude prices to help maximize the valuation of the state oil company ahead of an (IPO) that was scheduled for this year. That completely changed in April when Trump put pressure on Riyadh to keep the price of crude in balance, he wanted to stop U.S. fuel costs going up ahead of the U.S. midterm elections in November. Now Saudi needs cash to finance a series of economic development projects.

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Weakness in emerging market currencies


Emerging market currencies fell again yesterday with currencies falling all across the board with some of the going to record lows. Some of the worst were Indonesia's rupiah that fell to a 20 year low yesterday at 14,940 versus the dollar. It recovered slightly to 14,925 afterward. The Argentine peso went down about 3% after it crashed 16 percent last week. Its losses this year are almost 50% against the dollar. Also this morning, the Indian rupee went down to a new one week low, 71.78. The popular Turkish lira slid yesterday, and the South African rand fell about 3% on the report that its economy has fallen into a recession. Now generally the MSCI Emerging Markets Currency Index fell by about 0.45% yesterday, which was the biggest drop in 14 days. From the start of 2018, it went down more than 5.50%. The USD went up against other currencies. It found a support as the new U.S.-China trade tensions gave more confidence to investors. This weakness in emerging market currencies is also a good clue for the US Dollar.

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Bitcoin on the move again


Bitcoin went up about 1.23% yesterday getting back Monday’s 0.47% fall to end the day at $7,357.2. Early morning recovered from an intraday low of $7,246. Bitcoin went up through late morning and early afternoon to an intraday high of $7,415.4. Bitcoin broke first major resistance level at $7,356.45 to hit $7,401 levels for the second time in the past days, prior to which was back in the 1st week of August. The high selling pressure and Bitcoin’s failure to hold above $7,376 by day’s end reassured the extended bearish trend formed in early May’s swing hi $9,999, with a break out from $7,376 needed to support the formation of a bearish trend reversal.

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