SVB assets snapped up but Deutsche Bank is a warning

SVB assets snapped up but Deutsche Bank is a warning

• SVB assets taken on by First Citizens Bank: US authorities finally find a buyer for some of Silicon Valley Bank 
• USD is edging positively higher, with JPY lower: JPY weakness is the main move today on major forex, with the USD starting to make gains.
• Equities rally on Monday morning: European indices have opened higher, with US futures around +0.3% higher.
• Precious metals lower, oil higher: In commodities, gold and silver have pulled back, but oil has found support and is testing higher.

Some good news, but the fear remains what’s the next domino

Some of the assets of the stricken US bank, Silicon Valley Bank, have been snapped up by another mid-sized US bank, First Citizens Bank.

This is welcome good news as the US banking authority, the Federal Deposit Insurance Corporation has been looking for a buyer for a few weeks. 

First Citizens has taken on all the deposits and loans along with some of the assets of SVB (c. $72bn of assets). This has left the FDIC still with c. $90bn of SVB’s assets.

Deutsche Bank will remain under the microscope

However, amid the welcome news of the sale of SVB assets, there is also something a bit more worrying to consider. 

Is the European bank, Deutsche Bank the next to falter?

The credit default swaps of Deutsche Bank (an insurance product that pays out in the event of a failure) increased sharply on Friday, to levels not seen since 2018.

Deutsche Bank has come under pressure historically amid fears over its solvency. 

The soaring cost of its credit default swaps has hit the shares on several occasions in the past seven years.

The latest move caused DB shares to dive on Friday, with banking shares across Europe also jagging lower again.

There is more of a settled feel across the sector on Monday, with banking shares and broader equity markets rebounding.

However, this remains a tentative rebound and the fears over banks are not going away overnight.

After Credit Suisse was subjected to an arranged marriage with Swiss rival UBS, the big question is who could be the next domino to fall? 

Equities look to rally, USD trades mixed

This morning we see that sentiment has been more positive.

There were no high-profile scare stories over the weekend and markets look more settled to start the week.

This is leaving equities to start the week on a firmer footing, whilst forex markets look more settled. 

Can this last though?

Already we’ve seen earlier gains just tailed back slightly. The moves look cautious.

German DAX (GER40)

An early rally this morning has just ebbed away as trading in the European session has kicked into gear this morning.

Once more this is coming as a technical resistance of a pivot band between 15150/15275 has encouraged sellers.

The concern is that:

• This is coming under the move averages
• The daily RSI is struggling under 50

This points to a negative bias to the near to medium-term outlook.

The support of Friday’s low at 14821 is increasingly important now above the key support band 14450/14680. 

Above 15327 resistance is needed to re-engage a more positive outlook.

AUD/USD

The pair has been tailing off in recent sessions and started to gain traction lower on Friday.

An early rebound today is already losing traction and is threatening to tail lower again.

• The run of higher lows in the past couple of weeks was broken by Friday’s negative candle.
• The resistance has formed in a band of overhead supply between 0.6695/0.6780
• The daily RSI is tailing away from 50 again, leaving a negative configuration.

This all still points towards selling into strength near term for a likely retest of the 0.6564 low.

Support and resistance levels for Forex, Commodities, and Futures/Indices 

Data: MT5/IXOne

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