Stock Markets Mixed as Turkey Hikes Interest Rate Again

Another day, another eventful session in financial markets, as volatility remained elevated, especially in currencies today in European trading. Equities are having a relatively quiet day following a very hectic period, as bulls are still in control in the US, while Europe and most of Asia continues to lag behind from a technical perspective.

DAX Index, 4-Hour Chart Analysis

Another rally attempt faded in the DAX index today, and the relatively weak European Indices are still well below their January highs, despite the weakness of the Euro and the rally in the US. Given the deterioration in the financial segment, we are leaning bearish towards European assets for the coming weeks.

Nasdaq 100 Futures, 4-Hour Chart Analysis

The Nasdaq, which has been leading the way higher ever since late April is showing signs of weakness after breaching its all-time high recently, and with the momentum indicators in overbought territory, a correction could already be underway. The S&P 500 and the Dow are performing slightly better today, but the negative divergences suggest that a risk-off shift could is likely ahead.

The Dollar continued its correction today, as the Euro climbed above 1.18 for the for the time since mid-May, and the Yen also gained some ground against the Greenback. That said, risk-on currencies are not shining, as the Dollar cleared the overbought momentum readings we expect a bounce in the reserve currency before the Fed meeting next week.

Clouds Gather Over Emerging Markets

BRL (Brazilian Real)/USD, 4-Hour Chart Analysis

The rising global rates and the strengthening Dollar put several vulnerable countries in danger, and emerging market currencies are still under pressure. The Brazilian Real is defying the ongoing central bank intervention and it’s threatening with new multi-year lows, being down by more than 20% this year against the USD.

USD/TRY (Turkish Lira), 4-Hour Chart Analysis

Another “weak link”, Turkey is back in focus today too, as the Turkish central bank made headlines in early trading, raising its most-watched benchmark rate by 1.25% to 17.75% in a desperate move to stop the renewed depreciation of the currency. With the early elections in the country a bit more than two weeks away, the move supposed to calm markets and voters alike, while still none of the structural problems have been issued.

On a positive note, the Dollar’s recent broad correction gave a breather to the country, but despite the positive initial reaction by the Lira, the currency remains at dangerous levels. We don’t know how much time the central bank bought with the hike, but technically speaking, the uptrend is intact and the USD/TRY pair held up above the levels hit following the previous emergency rate hike.

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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.