1 Minute Market Rundown – 26th April 2022
Risk Stages a Comeback into the US Close
Crypto Rebounds
Sterling and Euro Continue to Look Vulnerable
As you finished work yesterday you would have been forgiven for expecting risk markets to remain offered following what could only be described as a horrid day for markets. China’s ‘zero covid’ strategy as well as concerns over inflation weighed heavily on markets. Even a cut in China’s RRR (reserve ratio requirement) – a method of freeing up liquidity – was largely ignored by the market.
However, equities and risk markets staged an impressive rally into the close yesterday. Tech stocks (led by Microsoft) saw both the S&P and Nasdaq close up on the day. An important thing to keep in mind is that we are approaching month end. We may see inflows into equities as month end rebalancing takes place which could explain the moves seen yesterday evening. This week we also see banks and big tech report earnings which may provide some short term support if they beat forecasts. Whilst this may see some support for equities this week, we feel savvy investors will use these rallies to get short and we are of the same view. We still can’t see how risk markets can sustain an extended rally in this current environment.
Crypto markets enjoyed the bounce in risk as BTC and ETH reclaimed ground above $40,000 and $3000. Not to be the harbinger of doom but we aren’t quite buying into this rally as mentioned above. We have been underweight crypto for a while now and will continue to do so until we find ourselves in an environment that is conducive to a sustained rally in risk. The biggest winner over the past 24 hours has been DOGE. Not too surprising following the news that Musk is going to buy Twitter. In other news Fidelity, the largest provider of 401(k) plans said it would enable its participants to put a slice of their retirement money into bitcoin – if their employers allow it.
We have taken profit on half of our short eur/usd and gbp/usd shorts. We are staying nimble and will look to add to these positions on rallies. In EUR/USD we would ultimately like a rally to 1.0760/70 to sell with 1.2775 providing the first sell zone in GBP/USD. 1.2830 will be a key resistance level which is the 50% retracement level from the 1.1412 low seen in March 2020 and the subsequent 1.4248 high seen in June 2021.
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