1 Minute Market Rundown – 16th August 2022

Equities Continue to Hold Firm
USD Exceptionalism
Crypto Finds Resistance

A relatively quiet day yesterday which saw equities continue its grind higher with the Nasdaq leading the way. I have to admit I find myself caught in two minds. I was over the moon to see the inflation numbers print lower last week and oil prices come off but I just think it is a tad too early to get carried away.

The equity rally has been impressive but I wonder if it will soon run out of steam. The FED is still going to hike, inflation is still high, living costs are still soaring and yields are hardly backing off. In fact when you look across all markets it is only really equities bucking the trend and showing signs of risk on. So the question I ask myself is: are equities lagging the move or leading it? What I do know is that the S&P is approaching a key level of resistance at around 4320 (200 DMA). A break of this level may well actually see bulls emboldened to add to long positions and see the bears cut out of their shorts. I have lightened up my long risk positions ahead of this crucial level and will watch closely from here. I can’t see myself buying risk on strength and instead will look to re-buy on any sell off in risk markets.

I spoke yesterday about how I wanted to avoid the USD and now I find myself wanting to be nothing but long the greenback. It is just purely bid. I am sitting on my hands so as to avoid buying USDs at these levels but am looking for any selloffs to re-initiate longs. The way it trades currently, it feels like EURUSD will be back at parity in the next couple of days. UK employment data this morning did nothing to provide GBP with any respite and GBP/USD is once again lower this morning and we should be looking at a move sub 1.2000 later today which opens up the next leg lower.

Crypto bucked the equities trend and continued to see some profit taking yesterday. The performance of SHIBU and DOGE concerned me with both the coins having an impressive rally over the past couple of days. When I see these kinds of coins having aggressive moves higher, I wonder whether crypto is overheating again. The majors have held in relatively well thus far with $23500 and $1850 providing immediate support in BTC and ETH respectively. I continue to tactically build up a short ETH/BTC position ahead of the merge.

As always, good luck out there.

Lux Thiagarajah – Head of Markets

1 Minute Market Rundown – 16th August 2022

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