Pre-Market: Dollar Rallies on Hawkish Fed, Turkish Lira Hits Record Low

It’s been a busy overnight session following the Fed’s scheduled monetary meeting as the Dollar’s strength weighed on risk assets across the globe. While Treasury yields didn’t signal a big change in the market’s perception about the tightening schedule of the Fed, forex markets and equities behaved in line with a hawkish surprise. The reserve currency gained ground on most of its peers, with the already struggling emerging market currencies feeling the pain.

DAX Index, 4-Hour Chart Analysis

European and Asian stocks declined by more than 1%, as measured by the major indices, with the Shanghai Composite getting close to its bear market lows, as selling resumed in earnest and the Yuan slid to a new 12-month low against the Greenback.

Shanghai Composite, 4-Hour Chart Analysis

With all of the China-related assets also being pushed lower, it’s hard to ignore the weakness in the country, as the country was already similar to a fly looking for a windshield before the trade war, and now the credit-fueled growth model is crumbling under its own weight.

S&P 500, 4-Hour Chart Analysis

The great divide between the US and the other major markets is apparent yet again, as the US benchmarks are faring much better amid the broad decline, despite the Dollar’s relative strength. That said, the US markets are also in the red before the bell, and it seems that yesterday’s great Apple report alone won’t be enough to stop the correction in the Nasdaq, with the other tech giants not following in the footsteps of the largest public company.

Commodities and Risk-On Currencies Drifting Towards Lows

USD/TRY, 4-Hour Chart Analysis

The Turkish Lira plunged to a new all-time low against the Dollar and the Euro alike, with the USD/TRY pair bursting through the psychologically important 5 level for the first time in history. The recent rough rhetoric by Turkey towards the US added to the concerns regarding the financing troubles of the country, as political isolation would be a huge problem for the already troubled financial system. The Dollar is also up compared to its major peers, with commodity-related currencies being among the weakest assets.

WTI Crude Oil Futures, 4-Hour Chart Analysis

As for commodities themselves, the whole segment is lower today, as trade worries, the weakness in Asia, and the Dollar’s strength are all weighing heavily. Crude oil is back below the $67 per barrel level following the bounce above $70, and we continue to expect further weakness in the Black Gold, as growth is slowing outside the US.

Gold is holding up near the $1225 price level, but the recent lows are very close, and there is no sign of a trend change despite the deeply oversold long-term momentum readings and the bearish sentiment. Copper is in a similar setup, but the $2.70 support is even more important than in the case of gold, as a clear move below that would cement a larger scale downtrend in the key industrial metal.

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Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.