Asian Open: Central Bank of Erdogan (CBOE) pulls no punches

USD/TRY won currency of the day to hit new highs after ‘impartial’ President Erdogan’s hand-picked central bankers cut rates by 200 bps despite raging inflation.

Charts (6)

The yen was the strongest major currency during a risk-off session overnight

Asian Futures:

  • Australia's ASX 200 futures are up 2 points (0.03%), the cash market is currently estimated to open at 7,417.40
  • Japan's Nikkei 225 futures are down -180 points (-0.63%), the cash market is currently estimated to open at 28,528.58
  • Hong Kong's Hang Seng futures are up 59 points (0.23%), the cash market is currently estimated to open at 26,076.53

UK and Europe:

  • UK's FTSE 100 index fell -32.8 points (-0.45%) to close at 7,190.30
  • Europe's Euro STOXX 50 index fell -16.44 points (-0.39%) to close at 4,155.73
  • Germany's DAX index fell -50.36 points (-0.32%) to close at 15,472.56
  • France's CAC 40 index fell -19.44 points (-0.29%) to close at 6,686.17

Thursday US Close:

  • The Dow Jones Industrial fell -6.26 points (-0.02%) to close at 35,603.08
  • The S&P 500 index rose 13.59 points (0.3%) to close at 4,549.78
  • The Nasdaq 100 index rose 100.884 points (0.66%) to close at 15,489.59

 

Indices:

The US labour market continued to tighten with unemployment claims hitting a fresh 19-month lows. Initial claims fell -6k to 290k whilst continual unemployment claims fell -122k to 2.48 million.

Wall Street was mixed with the Dow Jones closing effectively flat at -0.02%, the S&P 500 rose 0.3% (and closed to a new high) and the Nasdaq 100 rose 0.66%.

The ASX200 remain in an uptrend on the four-hour chart although is currently within a choppy consolidation. 7400 is today’s pivotal level as a break beneath it marks a near-term top, although it could just as easily use that level as a springboard for its next leg higher.

 

ASX 200 Market Internals:

The IT sector has outperformed ASX 200 over the past 30 days

ASX 200: 7415.4 (0.02%), 21 October 2021

  • Real Estate (1.61%) was the strongest sector and Energy (-1.36%) was the weakest
  • 6 out of the 11 sectors closed lower
  • 5 out of the 11 sectors outperformed the index
  • 94 (47.00%) stocks advanced, 92 (46.00%) stocks declined
  • 67% of stocks closed above their 200-day average
  • 55.5% of stocks closed above their 50-day average
  • 67.5% of stocks closed above their 20-day average

 

Outperformers:

  • + 7.79%-Perpetual Ltd(PPT.AX)
  • + 5.85%-CIMIC Group Ltd(CIM.AX)
  • + 4.4%-Healius Ltd(HLS.AX)

 

Underperformers:

  • ·-5.82%-Flight Centre Travel Group Ltd(FLT.AX)
  • ·-4.38%-Super Retail Group Ltd(SUL.AX)
  • ·-3.52%-A2 Milk Company Ltd(A2M.AX)

 

Forex: Central Bank of Erdogan (CBOE) pulls no punches

A bearish outside day formed on AUD/JPY at a key resistance level

A bearish outside day formed on AUD/JPY at a key resistance level

In a move of sheer defiance, the newly selected central bankers by ‘impartial’ President Erdogan lifted interest rates by 200 bps. The president had fired three central bankers on the 14th as they opposed further cuts, and reappointed hand-picked relatively unknown replacement to carry out his monetary policy preferences of lowering rates despite inflation sitting around 20%. The borrowing rate is now 14.5% (16.5% previously). The 200 bps cut saw USD/TRY rally to new high in an eerily similar setup to their last cut in September, where a two-day retracement before the meeting led to a rally on the day of the ‘surprise’ cut. Rinse and repeat. 

The Japanese yen maintained its place as the strongest currency through European and US sessions after it caught a bid lade in Asia. Traders were once again concerned that the fallout of Evergrande will create a ripple effect across markets after Twitch ratings agency placed 29 Chinese property companies under UCO (under criteria observation). USD/JPY hit a 4-day low and likely triggered stops below 1.14 before retreating back to that level by the close.

 

AUD/JPY and NZD/JPY were the biggest movers (to the downside) as they finally began to correct from their overextended highs with bearish outside days. We suspect near-term risks point to the downside for such pairs as they try to find their corrective lows.

The US dollar also looks ready to correct (higher). The US dollar index (DXY) printed a bullish inside day above at support within a bullish channel. And with plenty of flash PMI’s scheduled for today then it could shake things up for a few pairs to make or break trends.

USD/CAD invalidated a bearish channel and looks set to perform a trend reversal on the four-hour chart

USD/CAD looks appealing for a potential trend reversal. A false break of support with a bullish engulfing candle on the four-hour chart marked the low, and we have since seen a clear break of the bearish channel. Whilst we need to see a break above the weekly pivot and 1.2410 swing high to confirm a change in trend, its desire to change trend seems apparent. It’s therefore one to watch at least to see if it can eventually break higher (even if it drags out to next week).

We have quite a host of economic data to finish the week off. Flash PMI’s are released across Asia Europe and the US, starting with Australia at 09:00 AEDT and Japan at 11:30. Japan also release CPI data at 10:30 but don’t expect it to set the world alight with annualised inflation of 0% and monthly last at -0.4%. UK retail sales is scheduled for 17:00, European PMI’s at 18:30 / 19:00, Canadian retail at 23:30 and US PMI’s at 00:45. Day traders - So take your pick.  

 

Commodities:

As we suspected, volatility for oil prices has indeed been choppy at the highs with volatility and volumes increasing towards 84.0. With outside days appearing near a cluster of resistance levels, we are not yet convinced this trend is ready to simply move higher. Although it could take a break below $80 to trigger stops before we see any decent follow-through to the downside.   

 

Up Next (Times in AEDT)

Flash PMI data across Asia, Europe and the US are today's main economic calendar events

 

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