Last week’s volatility in the equity and bond markets kept traders on their toes as sentiment seemed to change by the hour.  

What will this week bring? More of the same or maybe a semblance of calm will return to the markets? Well the early activity would suggest the latter. 

FX was very quiet during Asia and Europe with the only real movement being some profit taking in EUR/GBP after Friday’s big sell-off. 

Crypto however would see a continuation of the weekend move higher with ETH rallying to $202 and BTC to $10,800. 

Again, no real catalyst but the old ‘no news is good news’ adage seems to be holding true. Once again, a dip below $10,000 for BTC is short-lived. Asian and European equities enjoyed some relief rallies much for the same reason as crypto – the less negative news the better. The Hang Seng Index closed up by more than 2%, the German DAX Index by 1,3%.

Onto the US session where it was a very similar story. FX remained subdued although USDCAD rallied from 1.3250 to 1.3330. Otherwise it was familiar ranges for the major currencies with the market happy to wait for new developments. 

US equities followed on from Asia and Europe with the Dow Jones opening up over 300 points or 1.2%. The S&P and Nasdaq showed similar percentage gains. Gold drifted off $1510 to $1493 as risk sentiment improved but ended the day nearer $1496. 

The bond markets were also quiet with the US 10Y yield up a fraction from Friday at 1.608%. As the day progresses, EURUSD drifts off its highs as a move over 1.1110 fails and we close back at 1.1080. 

USDJPY ends near its highs at 106.65. Starting to feel like the markets are keen to buy USD across the board. Equities close off their best levels, but all three major US indices registers closes around +1% or better. There will be busier days this week, especially with the Federal Reserve Jackson Hole symposium looming.

For a quick technical piece I wanted to take a look at ETHUSD for all our crypto traders out there. As you can see from the 1H chart the 197.86 level has become rather pivotal in the short term. 

Having failed to break resistance around $237, this level held a couple of times on the way down, before a clean and very sharp break took us towards $173. Bouncing back higher at the weekend, this level failed to break the first time before pushing through today. Definitely a level to keep an eye on.

David Hannigan
Author

A graduate of the Cass Business School, Dave's career began with Credit Suisse as an Equity Options Trader on the London Stock Exchange, before moving into the world of FX with Chemical Bank and Citibank. 1994 saw him join National Australia Bank, first as a Senior Dealer, then Senior Vice President and Chief Dealer.

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