The rollercoaster of sentiment swings back higher again

Moves to protect US banks help sentiment to recover

• Big US banks rescue First Republic Bank: 11 big US banks have collectively deposited $30bn into First Republic Bank to help with its funding. 
• The rollercoaster of sentiment swings higher again: The dollar is out of favour, with higher-risk assets outperforming major markets 
• USD underperforms: The USD is the worst-performing currency in major forex today, with AUD and NZD leading the recovery.
• Equities rebound: European indices recover, but US futures look tentative.
• Precious metals and oil rally: In commodities, silver is leading gold higher. Oil is trying once more to build support.

Another plot twist in a crazy week

The great and good of the US banking industry have moved to protect the system.

11 of the biggest banks in the US have clubbed together to deposit $30bn into First Republic Bank (a medium-sized US bank). This is to ensure that the bank remains liquid.

It is a move to restrict the banking crisis that has threatened to take hold in the US.

A bold move, but the question remains, will it solve the problem?

This came after moves in Europe on Wednesday to protect Credit Suisse from a funding crisis.

US banks borrowing big from the Fed

Another sign of the strain in the system is that US banks borrowed record amounts from the Federal Reserve last week.

• $164.8bn borrowed in the week to 15th March
• Massively up from $4.58bn borrowed in the week to 8th March.

This also dwarfs the previous record borrowing amount of $111bn that was hit during the financial crisis of 2008. 

This has contributed to a big spike higher in the balance sheet of the Fed.

Markets are taking the positives, for now

All this funding for the US banking system could be good, but it could also be bad:

• The positives are that it shows the industry and authorities are moving fast to protect the banking system so crucial to the US (and global) economy.
• The negative angle is that it shows that there is a massive problem and if this does not work, it could turn into something far worse.

For now, though, markets are taking these measures as being positive.

Risk appetite is looking strong this morning:

• AUD and NZD are strong whilst the USD is underperforming on major forex
• Commodities are higher, with silver outperforming gold
• Equity markets are rebounding

Beware: Rollercoasters tend to come back down again

As we said, this looks good for now. 

However, this has been a wild ride and volatility remains high. Any sign of strain again could see the rollercoaster come careering back down.

Only time will tell.

USD falls over, gold positive, US futures at a crossroads

EUR/USD

The USD falling over has pulled EUR/USD back higher again.

The market remains stuck in a choppy range over the past five weeks.

Wednesday’s huge bear candle was followed by a calming day yesterday.

We look at closing moves either below support at 1.0480 or above resistance at 1.0804 to be important trigger levels for the next direction.

Gold (XAUUSD) 

Gold has been volatile in recent sessions but the move higher has continued and is threatening to break out.

Recent resistance has been found at $1937. However, if this can be broken then a retest of the $1960 key February high is open.

Momentum is strong with the RSI in the high 60s, with upside potential for moves into the 70s.

Initial support is at $1907/$1915, with a more considerable near-term support band between $1890/$1900.

S&P 500 futures (SP500ft) 

The rebound took hold yesterday. The market is now testing the resistance of the six-week downtrend channel.

This looks to be an important crossroads as the daily RSI is again around 50 (where the early March rebound faltered).

Resistance at 3901/3947 has been cleared and is now becoming a basis of support.

A move above resistance at 4020 would open the key lower high at 4081.

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

Data: MT5/IXOne

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