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Trader thoughts - after a period of worry positivity sweeps through markets

Chris Weston
Head of Research
Jul 22, 2021
We look ahead to the ECB meeting (22:30 AEST), with EURUSD heavy on clients minds and price ominously setting up for a break of the recent downtrend or 1.1770 support.

let the closing break dictate, whichever way it shall be, but we do see a market expecting the ECB to remain dovish. Our Research Strategist, Luke Suddards, has puts a wrap together here for those interested and for today's market wrap news and views, do watch my on demand video.

After the note yesterday on the AUD, we’ve actually seen the AUD shorts part covered – quell surprise – and while (on the day) we’ve seen a bullish reversal in AUDUSD and AUDJPY and a bearish reversal in EURAUD, I would put this down to traders’ adding risk, as opposed to a genuine AUD bull move – with the USDX having as bearish reversal – AUDCAD still looks poor on the daily and could start to bear trend, after breaking the range low – one for the radar, but if it heads lower I’d be jumping on.

GBPAUD holds in firm too and appears to be eyeing a grind into 1.8700

Crude has found a far better tone

With a big upside move, which has underpinned risk sentiment – the fact that US bonds have sold off is also adding real tailwinds with both the US Treasury 10s and 30s finding good sellers (yields higher) and we’ve seen re-opening stocks working well – the US 10-year is back above its 200-day MA (at 1.28%) - with our new rollout of ETFs, put the TLT (iShares 20yr+ Treasury) and IEF (7-10yr Treasury ETF) on the radar as these seem key to broad markets right now. Can yields grind higher from here?

There's been plenty of calls that a low has been seen in yield and some have been burnt along the way. However, if we move into 1.35% and above then energy and bank stocks will rally, the US2000 will be the pick of the global indices and it may weigh on Gold, which is holding the line into 1795 – coincidentally the 50% retracement of the March-June rally.

Gold may have found sellers but the same is not true of Silver, where XAGUSD printed a bullish reversal – follow-through buying today takes this to the 5-day EMA and a close above here suggests risks of a squeeze into 25.50. That said, I'd be turning this into a lower timeframe and when price trades into the 5-day EMA look for the reaction – it would not surprise to see traders fade here and if we do see a reversal and downside momentum picking up, I’ll be keen to be involved.

We’ve seen good flow in Crypto

With bullish reversals popping up all over the shop. Elon Musk has turned saviour again and pumped up the space, with Bitcoin now oscillating around 32k. One day of gains does not make a trend, and the bulls would be leaving buy stop orders above yesterday’s highs hoping that momentum spills over. As it stands, my momentum matrix is still very neutral with only Dash above the 5- and 20-day EMA and holding a 9-day RSI above 50. A lot more work is needed to get the momo/FOMO crowd excited, but at least it mitigates a collapse into 25k or below, for now.

For the equity heads out there be aware Robinhood should be listing on the 29th and while I see many saying borrow will be hard to source initially, we will be offering shorts from the outset. It should attract attention, both from the long and short side, as the stock splits opinions like few others.

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