Weekly Game Plan 13.8.18

You can always find my weekly analysis in the FXRENEW Blog each week, along with articles and thought leadership pieces. Our best pieces can be found in one placehere. If you want to get an idea for how I trade trends, this webinar will help. If you want to know how I Trade the News, this plan will help. 

Here is this week's Game Plan:

Themes for the week ahead:

• The coming week looks likely to be another eventful one, with the Turkey crisis dominating.

The Eu is exposed to Turkish banks and the ECB is worried about non-hedged exposure to Turkish companies and if Turkish banks fail, there will be a contagion effect. The only solution is to remove Erdogan by force, because after his discourse on Friday, he seems quite reluctant to do so himself or change course.



Some analysts say a big hike by the Turkish Central Bank will end the Lira rout. I disagree. Central bank intervention works so long as there's confidence in government. But confidence in government is the main reason for the Lira's issues in the first place. I do believe there's a hyperinflation risk around the corner. Here's a chart with key levels going into the week:

• Turkey aside, BREXIT will be back in focus. EU negotiators are due to meet their British counterparts on Thursday and Friday, with concerns growing about the likelihood of a no-deal Brexit if the talks break down.
• China will also be under scrutiny (again) with investors trying to understand what kind of reaction (if any) the Tariff War is generating. To China's benefit, they have been developing a domestic market for goods & services, and are not as dependant on exporting to the US as other countries are.
• Stocks may be vulnerable if Emerging Markets feel more of a squeeze on Turkey (risk-off/contagion) and a stronger USD.

Data in the week ahead:

• Wages and employment data are the focus on the Australian economic calendar
• China releases data on retail sales, industrial production and fixed asset investment.
• In the US there is data out on retail sales.
• The June UK employment report will be released, as well as the CPI for July.

On the Radar:
I don't particularily suggest trading TRY around here. But if you must trade it, ONLY maintain a long-bias on USDTRY and keep positions extremely small, and keep your ear on the wires.
I like the odds of further losses in the Dax due to the European exposure to Turkey, but for those that can, I'd suggest a more granular watchlist of the more exposed European bourses like the IBEX (Spain) or the FTSEMIB (Italy).  In FX I continue to like USD longs vs. Euro and NZD.
Good Luck!