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Potential Opportunity - Patience PaysPreviously I wrote a brief note explaining caution for the US Banking industry as illustrated by XLF. This is due to: - market risk of a broader market pullback - as currently being experienced - impact from Covid-19 variants like Delta etc., - the cumulation of record high bank reserves (cash) which serve to stress Bank Capital and Capital adequacy ratios. These reserves have been building up due to the FED's policy of buying Bonds in the market. Once sold, the vendor banks cash at a Bank which severs to increase the Bank's liabilities. The FED has tried to mitigate this effect by using reverse repos - which is ridiculous - it should stop the buying / QE ie the naughty word - Taper!!! :) The opportunity to be long includes: - market risk subsides as debt ceiling is mitigated. - infrastructure bill goes through which is GDP positive. - further recovering of the US and European economies noting n increased travel facilitated by increased vaccination rates. - Bank capital being strong as it is, has seen some Banks start to sell assets which have a lower capital rating (for the purposes of capital measurement) and will eventually open the door to strong lending programmes noting the prior comment. - still good fiscal support - so economy, GDP and the broader market is growing. In other words a decent credit cycle may ensue which will be very positive for Banks and of course XLF. However - Patience Pays!!! Buying in smalls around key support areas and build a position - no 'binary' trading.
AMEX:XLF
by Adam-Cox
Feeling some bullish vibe on USDCHFI know FED is playing big moves ahead so far to prevent the State from the pandemic before it may cause more disruption around the country. The reason is beyond technical analysis for me to think even slightly how this pair might gonna end up trending upward. The big moves which I'm talking about from fed were the double rate cut within a month and some repo market actions. They aren't taking things slightly any more the moment when they decided to drop their benchmark rate around 0%-0.25% and some big Qe plans coming later. I know most of global central banks honchos are too serious about this pandemic at this moment and Fed has already shown us the real action lately which should slowly help to resolve the issue which had generated by that pandemic "coronavirus" within the state and its economy. Lastly don't forget about Swiss National Bank Intervening to Weaken Franc on recent data from the central banks. They just don't like their currency to get overvalued for various reasons. These conditions let me assume this pair may probably make some new swing highs.
Long
by jessi061
6
ORBEX: Fed Injects Money in Repo Markets BUT Is That Really QE?Market participants seem to have taken Fed’s liquidity injections as QE, dragging dollar down. Despite increasing the balance sheet, the Fed’s move should be really reassuring investors that funding pressures, at least in the short-term, are and will be lower. Or, should it not? Well, the demand for funding was slower than expected near year’s end. But is this perhaps because institutions are trying to shrink their balance sheets to hit yearly targets...? Timestamps USDCHF 2H 02:00 AUDUSD 2H 04:50 NZDUSD 2H 05:55 Trade safe Stavros Tousios Head of Investment Research Orbex This analysis is provided as general market commentary and does not constitute investment advice
by Orbex