the weekly market report
Sterling appears to be weathering the global banking crises better than it contemporaries and now outperforming on the G8 basket.
A break and close above daily resistance at 1.22 will pull the 1.24 resistance zone into focus. Stops below 1.2120 make for a decent risk reward trade.
gold to 2050
The safe haven draw of Gold is likely to persist for the week and global uncertainty surrounding the banking sector continues. Gold has breached the psychological resistance seen at 2000.
The intraday pullback from profit-taking has been reasonably controlled. The USD could trade lower this week as the Fed eases up on the hiking pressure. Gold will continue to benefit. The next level of resistance is seen in 2050.
Buying pullback with stops below 1950 makes for a decent risk-reward trade.
From SVB to Credit suisse
Credit Suisse, the next major bank to fall is now being bought out by competitor UBS in an attempt to save what's left of the former banking giant.
This sent shockwaves across the markets and even led five central banks to engage in a coordinated effort to ease financial strain on the global economy.
Although the stocks are currently bid, we believe long term that the stocks will continue to decline as investor sentiment grows tired of the on going period of decline.
Look out for rejections from major areas of liquidity to take positions to the next major lows.
the major macro headlines
Eyes on the FED
This week we are likely to see the FOMC announce another rate rise, but potentially trimmed down to just 25 basis points (Bp). The global banking uncertainty has caused central banks around the world to rethink the timing of their terminal rates. The CME’s FEDWATCH is now pricing in FED cuts as early as the June meeting. When the case for cuts really does begin to gather momentum we can expect the USD to continue is decent. Currently, the Greenback is treading water in the mid range. DXY support is seen around the 103 zone. If the Fed does deliver a 25bp rise and indicates an earlier terminal rate then this is likely to be tested this week. A break and close below 103 will pull the 100 level into focus.
Credit Suiss Blow out
Credit Suisse, a Swiss multinational investment bank and financial services company, has recently faced a tumultuous period resulting in a significant decline in its financial performance ultimately leading to it's collapse Amongst the latest setbacks, the bank has been struggling with a series of high-profile scandals that have led to a decline in customer trust and severe regulatory scrutiny. One of the significant events that led to the fall of Credit Suisse was the revelation of its connection with the Archegos Capital Management scandal, which resulted in a loss of $5.5 billion. The bank's failure to manage the risk associated with Archegos Capital Management's trades led to a significant decline in its reputation, and the bank's top executives were held accountable for the fiasco. Additionally, Credit Suisse has also faced internal governance issues, with reports of harassment and bullying leading to the departure of several senior executives. The bank's board of directors has also been criticized for its ineffective oversight of the management's actions. This has had some major ripple effects across the globe with five central banks engaging with one another to stop the bleeding. We haven't heard the last of this situation and will have to be prepared for what comes next.
BoE Interest Rates on the hike again
The stubbornly high UK inflation will likely lead to another 25 basis point rise when the UK Monetary Policy committee meets on Thursday. However, this is by far a done deal. The global banking turmoil is calling this hike into question by some analysts. There is now a 51% chance that the MPC will keep rates unchanged. However, as the with the MPC last week, the Central bank is mindful not to cause panic but refraining so we believe the 25 bp will be delivered with a 7 to 2 vote. Sterling was little changed after the UK budget last week and is currently trading as one of the strongest currencies and appears to be not too affected by the fallout of the banking sector.
US employment market remains steady
The US job market has shown significant resilience in recent months, with the unemployment rate continuing to decline and job creation exceeding expectations. The gains were widespread across sectors, including leisure and hospitality, education, healthcare, and professional and business services. While there are concerns about labor shortages and wage pressures, the robust job market is a positive sign for the US econom although equally adding to the problem of inflation. This week's IJC data is expected to come in at a sustained level of around 200k. Should the data show a large jump from this number, it could cause a shockwave in the stocks but if it comes in as expected or slightly lower, we don't expect much in terms of a strike.
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