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Anxious weekend ahead

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By Craig Erlam  

A frantic week in financial markets draws to a close and it’s clear that investors are feeling very anxious about carrying risk into the weekend.

We all saw how fast things can move over the weekend and risk-averse trade at the end of this week highlights how nervous investors are about further fallout. If we can get through the weekend without more drama, Monday’s open could look very different but it’s going to take time for the wounds to heal.

Even with all of the measures undertaken by the U.S. Fed, Treasury, BoE, SNB, and US banks to stabilise the situation this week, we still saw distress in the markets. Credit Suisse was down 10% on Friday and not far from Wednesday’s lows, while First Republic was off 23% and down almost 80% in a little over a week.

Other regional banks also got hit hard again on Friday, a sign of dwindling confidence amid uncertainty over which will be next to require assistance. Authorities continue to work to stem the bleeding and more band-aids may be necessary to shore up confidence. ​

Energy

Oil prices were pummeled this week as turmoil in the banking sector increased the risk of a significant economic slowdown or recession this year.

Clearly, traders are not convinced that the worst is behind us which continues to weigh heavily on the price of crude, particularly going into a weekend when anything can happen, as we saw a week ago.

Should calm prevail, oil prices could bounce back and a peaceful weekend may be the first step toward that.

Gold

Gold is pushing higher again in risk-averse trade at the end of the week.

It’s hardly surprising that we’re seeing this going into the weekend as we learned last week just how much can happen over the two days when markets are not open.

With yields edging lower and gold trading near levels last seen in early February, it’s clear traders are adopting a defensive stance. Whether that continues in early trade next week will be determined by how eventful a weekend it turns out to be.

Key resistance levels remain $1,960 – around the February highs – and $2,000, a break of which would be a major psychological move and signal how much fear remains in the markets.

Cryptos

There are various theories floating around regarding crypto’s strong performance over the last week and frankly, the majority are more wishful thinking than logic.

But that’s irrelevant at this point as the only thing that matters is that Bitcoin is up another 7% at the end of the week, more than 30% since last Friday, and some major technical levels have been wiped out in that time.

The next is $28,000, followed by $32,500 above that. It seems pointless to try and anticipate where the rally will peak as past moves often didn’t make much sense either, but still kept going, although this time seems particularly unsustainable. It should be interesting, regardless.

 

Craig Erlam is Senior Market Analyst, UK & EMEA at OANDA

Opinions are the author’s, not necessarily that of OANDA Global Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.