US Bank Holiday Quietens the Market
Crypto and Risk Markets Hold In
Commodity Prices Begin to Rollover
It took it being a US bank holiday but we finally had a quiet day, hallelujah! Equity futures, which were open, pointed higher and as such we saw a pause in the risk sell off. The USD continued to give back gains with EUR reclaiming ground above 1.0500 and GBP/USD trading back toward 1.2300.
So as always…what now? Well on the day it feels like risk markets want to do well. What is interesting to note and may support risk sentiment in the short term is the fact that commodities are selling off. Everything from palm oil to wheat to corn is lower. Ultimately this could be deleveraging but the market may view this as peak inflation being reached which would be risk positive. The test will be if when the US comes in later they buck the trend and begin selling risk again.
Crypto markets are holding in well but I still feel it is too early to say whether a low has been put in place. What we are seeing and hearing is that effectively the OTC lending market is shut for business currently. Unsurprising with the market concerned about the ‘unknowns’ that exist out there and what the market desperately needs is a period of time with no bad news around margin calls etc. I have bought into the dip over the weekend and am happy to buy dips for now toward $17k and $850 in BTC and ETH. I would feel more comfortable calling a low if BTC and ETH could reclaim ground above $23k-$25k and $1300-$1400 respectively.
In FX, I would expect the USD to be sold off as risk does well, at least until the US comes in. It is far too early to say whether we have seen the peak in the USD but it does feel to me like risk wants to bounce a little in the short term. I remain relatively light in FX positioning with short EUR/CHF being the conviction trade at the moment, looking for a move sub parity.
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