What is behind the recent rally?

By now I am sure you are aware of the massive rally that has been happening for a month in financial markets, this refreshing uptrend left behind it a lot of people who were waiting for lower lows that never happened.

This rapid increase in prices trapped a lot of bears that got squeezed out of the shorts they have been accumulating over a couple of last months, we saw Bitcoin, Ethereum, Tesla, and even Facebook going up +30%.

What are the main reasons for this up trend?

DXY downtrend and USD weakening:

Since the end of September, the dollar currency index (DXY) has been in a  downtrend and unable to make new highs. This weakening of the Dollar comes after people expect the FED to pivot in the coming next FOMC meetings but as we saw yesterday it's yet to happen this might the reason behind this green candle on the daily DXY chart.

Also, we should mention that the Japanese central bank has been in some monetary trouble in the past 3 months struggling to maintain a stable Yen against the Dollar so in an attempt to restore some foreign exchange reserves they resolved to sell US Dollar to help the Yen. But this only resulted in deeper foreign exchange reserve reductions. This obviously weakened the Dollar despite the FED efforts of monetary tightening.

Good tech stocks performance:

After the continuous decline of tech stocks in the last couple of quarters, good earnings for the end of 2022 revealed that despite soaring inflation and an increased risk of a looming recession are still doing okay. Usually, this sector is the hardest one to get hit in this kind of economical environment. This coupled with expectations of a FED pivot or at least a slower rate increase drove the price of those stocks substantially which correlated with a similar increase in most cryptocurrencies.

Speculation of a FED pivot:

Simply speaking a FED pivot means that the FED will at least stop increasing interest rates or even starts lowering them. Why is that important? increasing the interest rate is literally removing money hard cash from the system this means there will be less money to pump financial assets but it also makes borrowing much more expensive and other investments like US treasuries much more attractive to investors.

As we can see on this chart FED pivot happens before the announcement of a recession so, in terms of historical accuracy, some could argue that we are near the top of the FED hiking cycle and it could be a great time to start buying back stock at decent prices. Also since financial markets are known to be forward-looking it's not a weird sight to see that phenomenon.

New Adoption:

Also plenty of big companies who had previously publicly criticized crypto like Amazon or Google are now openly creating crypto-supporting infrastructure within their business. Most notably we saw Amazon's partnership with AVA labs. Their native token AVAX saw a huge surge of 105% in the past month.

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