1 Minute Market Rundown – 14th April 2022
Russia – Ukraine
China Indicates Looser Monetary Policy
Crypto Consolidates
ECB in Focus
We have spoken about the path of least resistance being the USD higher, yields higher and risk lower. Thus naturally it made sense that we saw the total opposite yesterday…
We saw, in our minds, a relief rally across the board heading into the ECB meeting later today and the holiday weekend. Stocks bounced, yields came off and the USD sold off across the board. Tellingly perhaps, crypto didn’t really follow suit as you would have expected it to in a true risk on move. It for sure consolidated but hasn’t really kicked on. Clearly investors aren’t buying into this risk rally in crypto and it could forewarn what happens elsewhere.
There’s not too much to add regarding crypto sadly. It currently is trading in line with global risk sentiment so any analysis regarding stocks, FX and bonds holds true for crypto. The reality is that at the moment risk feels like it’s still on shaky ground. JP Morgan’s earnings didn’t do much to ease our concerns, missing analysts’ estimates and suffering a $524m loss as a result of the war in Ukraine. We wonder if other banks who have greater exposure to Russia may suffer even more. Despite all this risk did well overnight as China indicated looser monetary policy is on the way – on Friday they are expected to cut a key policy interest rate for the second time this year and reduce the reserve requirement ratio soon. BTC and ETH have held their initial support levels, for now. A break back below $39000 and $2950 would not bode well for either pair and open up a challenge of the lows seen last month. On the topside $42k and $3200 are the initial levels of resistance the majors will face. We have added to SOL longs with an easily defined stop at $95. Ethereum’s highly anticipated merge, slated for June, looks to be delayed by a couple of months following comments from their core developer. There wasn’t much market reaction to the news.
Following both the central banks of Canada and New Zealand hiking by 50bps yesterday all eyes today will be on the ECB. Consensus is for all three key policy rates to be left unchanged but for the ECB to confirm their intention to normalise monetary policy. A hawkish surprise would entail the ECB making a rate hike live for either the June or July meeting – currently expected 25bos in September and a second one in December. With uncertainty related to the French elections and a decoupling in the correlation between EUR/USD and interest rate differentials, a hawkish surprise may provide a good Euro selling opportunity. As a desk we are still looking to sell rallies and whilst 1.0930/40 is our initial level we are awaiting the ECB decision later before pulling the trigger.
The RBNZ meeting overnight shows just how important forecasting is. While they hiked 50bos they failed to commit to a series of further hikes and NZD subsequently sold off aggressively. USD/JPY rose to its highest level since 2002 and continues to be the best vehicle to reflect Fed hawkishness. We continue to look to buy USD/JPY dips toward 123.50.
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