*USD makes new cycle highs, risk rout pauses
*US equities tumbled on Delta worries, futures in the green
*Vix hits 25, bond yields collapse to the lowest level in six months
USD rose sharply along with traditional safe haven currencies like JPY and CHF as reflation took a beating and fixed income assets rallied hard. On the flip side, NZD, CAD and AUD were the biggest underperformers with the kiwi and aussie touching levels not seen since November last year. Cable hit five-month lows and is trading on its 200-day SMA as Americans were told not to visit the UK on England’s supposed “Freedom Day.”
US equities were under pressure yesterday with the S&P500 closing 1.6% lower and the Nasdaq fell 1.1%. European bourses were hammered, with the FTSE100 and Stoxx Europe 600 both tumbling 2.3%. Asian markets are down roughly 1% but futures for European and US markets point to a pause in the panic and a more stable opening.
Market Thoughts – Covid fears return
“Summer months always throw up challenging market conditions so the pandemic should really just add to the mix of thin liquidity and unpredictability. Less activity and less risk taking means more volatility.” We started yesterday’s thoughts with this and it will probably be fitting throughout the next few weeks. Traders, or the ones who are at their desks, are faced with thin markets across the summer months. This means moves will be exaggerated and sometimes tough to understand.
New outbreaks of the virus hitting global growth are the biggest worry currently. Teetering recovering economies are on the back foot even more, so the trend in dollar strength continues. Any slowing in reopening will probably result in tapering being delayed. Is this a buying opportunity in stocks? The issue with this is summer liquidity could leave us scratching our heads until more usual market conditions return.
Chart of the Day – Bitcoin below $30,000
Bitcoin is trading below $30,000 for the first time in almost a month and looks to be rolling over. Bears are endeavouring to establish another leg lower amid the recent series of lower highs and lower lows. The breakdown through the psychological $30,000 level may see more sellers jump on board as the bearish momentum picks up. First support lies at the $28,800 June low. The 38.2% Fibonacci level sits below here around $27,175 which could come quickly. Bulls need to push above $32,450 and ultimately $34,378 to slow the downside.
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