Insights

1 Minute Market Rundown – 26/07/22

Powell Steps Up Tomorrow
Crypto Comes Under Pressure

I lost a game of rock, paper and scissors first thing this morning so I will be the author of this piece which will barely differ from yesterday’s note sadly. FX, equity, commodity and fixed income markets have barely moved ahead of the FOMC decision tomorrow but sadly crypto markets have.

Crypto is a sea of red this morning with ETH, ADA and SOL down over 6%. Truthfully, I’m struggling to see a reason for such a move other than the market taking some profit/lightening positions ahead of the FOMC. The news that Coinbase faces a SEC probe over cryptocurrency listings isn’t helping sentiment either. It is priced in that the FED will most likely hike 75bps with 100bps seeming a step too far for them. The reaction of crypto markets tells me there may be more concern over a 100bps outcome or a whale has just unloaded a decent amount overnight. I am not a fan of tight stops in crypto but buying ETH at current levels (1410) and then again at 1350 with a 1300 stop is an attractive risk/reward play. I like buying BTC on a dip toward the 20000 level with 25200 continuing to offer good resistance.

For the first time in a while I feel the picture isn’t as clear for me as it was. I am torn between believing the FED will not be focused on anything but taming inflation (for now) versus my belief that surely they need to be concerned about data like the US PMI print on Friday. Trying to second guess the FED is a fool’s game so for now I will take them at their word and will assume tomorrow they stick to their guns and the USD will outperform the rest of the year. I am eagerly awaiting the day they do pivot the other way though.

In FX there was a little USD selling overnight, again it seems like it’s position squaring ahead of the FOMC meeting. I, along with Rich, remain disappointed that EUR/USD hasn’t traded lower but I still feel it is only a matter of time before it does. We haven’t reentered cash shorts but own 6 month puts. We maintain EUR/CHF shorts.

Good luck all!

Lux Thiagarajah – Head of Markets

1 Minute Market Rundown – 26/07/22

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