Updated: Sep 7, 2018
As discussed in our last MARKET CONDITIONS post (July 30, 2018), we were expecting some market movement due to an extremely active financial news week. Although the Bank of England did raise interest rates and the other economic announcements didn't seem to have a significant impact on the US Dollar at the time, other news has been driving the market over the past two weeks:
England announced that there might NOT be a deal in place with the European Union regarding Brexit prior to the deadline later this year. Also, the driving factor behind the Bank of England's recent interest rate hike may have been more related to inflation concerns rather than economic growth. These combined to send the GBP (Great British Pound) on a steep downward trajectory which negatively impacted our Target Strategy GBP/USD trade.
Turkey is being accused of manipulating their currency (Turkish Lira), falsifying financial data, and there is speculation that Turkey's economy is on the brink of collapse, similar to the financial crisis in Greece in 2015. Since the European Banks are the primary holders of Turkey's debt, the EURO dropped significantly in response. To compound the issue, the US Dollar is often viewed as a safe haven so the USD rose. Both of these negatively impacted our Target Strategy EUR/USD trade.
Prior to these news announcements, the US Dollar was still within a structured move and our targets had a high probability of being hit even though we were in a sizeable drawdown. As a result of the Brexit and Turkey news announcements, the USD did break structure last week. At this time, our price targets are not looking very promising in the near term for our USD trades.
I'll be looking for the best opportunity to close out at least a portion of our USD trades (potentially at a small loss) in order to free up some margin to continue trading other currency pairs.