1 Minute Market Rundown – 21st March 2022
Russia – Ukraine
Risk bounces
Crypto finds support
We find it rather telling that on Friday, a day you would have expected risk to be sold as the market headed into the weekend, saw stocks and crypto push higher. Now there could be a number of reasons for this. 1) the market is becoming accustomed to the Russia – Ukraine situation and the absence of bad news is seen positive, 2) with fiscal year end approaching, investors are taking money off the sidelines, 3) people are underweight stocks, 4) yield curve flattening boosts demand for risk assets and 5) market believes we are seeing peak Fed hawkishness. It probably is a combination of all 5 things. We have to respect price action and now feel it is appropriate to move to ‘buy the dip’ mode in regards to risk assets.
This week, we feel is quite important. The market is keen to see if last week’s rally was simply a relief rally or a shift in trend and sentiment. Should be noted that the rally came in a week when the central banks – FED, BoE and BoJ – all made interest rate policy announcements. Hawkishness is now priced in but the question is whether central banks can contain inflation without pushing the economy into a recession. Time will tell….
The S&P notched its best week, last week, since November 2020. It now approaches key resistance at its 50DMA and 200 DMA. A close above these levels would signify a trend change and should be watched closely.
Crypto continues to just trade quietly bid. ETH stopped where you would expect it to have done trading upto a high just shy of $3000. With Ethereum now merged on the Kiln testnet ahead of the blockchain’s move to a PoS network, we may well see ETH outperform BTC in the near term. BTC seems comfortable on a $40k handle but as mentioned a fair few times, needs to get back above $45k-$47k if we are to avoid a pullback. Trendline resistance now comes in just shy of $43k which will be the initial resistance needed to be overcome.
In other news Apecoin – token linked to Bored Ape Yacht Club – having dropped 80% on its launch has come roaring back with a 90% rally.
In FX, we saw the NOK and SEK have great weeks – two currencies susceptible to shifts in the outlook for growth. As with stocks, it feels market participants have now pricing in the effects on growth from the Ukraine invasion and now is focusing on other factors. Having been short GBP/USD – (on a dovish BoE), we are now considering converting that into a GBP/NOK trade. The NOK element will benefit if oil continues to trade firm but also does well if the outlook has indeed shifted and risk does well this week.
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This update: 14 Oct 2020
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