Hello, welcome to the Key To Markets preview of the Week Ahead.
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5-day performance as of March 3, 2022. 19:30 GMT
In case you missed it….
Russian banks frozen out of SWIFT. US and European leaders agreed to freeze some Russian banks out of the SWIFT payments system as part of sanctions over Ukraine.
Brent crude hits 9-year high. Oil markets priced in the difficulty of Russian oil & gas companies taking international payment and not exporting, by sending oil prices flying.
Sanctions send RUB tumbling. There was more pain for the Russian ruble with the currency sold en masse as investors exited the country.
Russian rates hiked to 20%. The central bank of Russia doubled interest rates to 20% to head off a collapse in the Russian ruble.
Big Oil & Shippers exit Russia. The world’s biggest shipping container company Maersk said it will only deliver basic goods to Russia, while oil giants BP and Shell will exit investments inside Russia.
Powell kills 50 bps. Fed Chair Jerome Powell said he will vote for raising rates by 25 basis points, killing off the chance of a ‘double’ 50-basis point hike.
EUR/USD breaks lower. The euro has fallen vs the dollar and most other currencies given the war breaking out on the East of the continent.
Copper tests October high. Copper prices have risen alongside many commodities amid fears of a supply crunch out of Russia.
Commodity FX. Surging commodity prices meant commodity currencies, including the Aussie and Kiwi were top risers this week.
Buying the dip. The Nasdaq was a big gainer among major indices as investors chose to buy the dip into bear market territory (-20%).
Source: Jim Bianco / Bloomberg
In case you were wondering which part of the market to hide your investment in during the turmoil of war and inflation – there has been a very clear answer. Commodities. Whether this trend continues will likely hinge on how Russia manages sanctions and whether central banks can bring down inflation.
Source: FX Street
The third round of peace talks are expected to take place at the start of the new week. Unfortunately, no ceasefire has been agreed upon- meaning market uncertainty will be ongoing.
Russian banks so far removed from SWIFT are Bank Otkritie, Novikombank, Promsvyazbank, Rossiya Bank, Sovcombank, VNESHECONOMBANK (VEB), and VTB BANK. This list could easily grow.
The European Central Bank is under pressure to act more decisively to the record high 5.8% y/y inflation in the Eurozone. No rate hike is expected- partly explaining the weakness in EUR/USD.
Far from being ‘transitory’ US inflation is expected to rise for another month to a new 4-decade high of 7.8% in February.
The uptrend in crude oil has gone parabolic – with Brent topping $120 per barrel by Thursday. At some point, the high oil price will have to severely affect economic growth expectations.
Here you can find an analysis of the major asset classes including the major forex pairs, gold, oil, and the S&P 500.
EUR/USD has broken down to multi-year lows underneath 1.113 support and below 1.05. The trend is down with further support down at the 1.10 big figure and 1.095. A break back over 1.113 could usher in a bigger bounce towards 1.125.
GBP/USD has double-bottomed at last week’s low and there is a downtrend line connecting recent highs. A break above this line would confirm a near term bottom and a possible rebound back to 1.349, the previous support.
USD/JPY remains in sideways trading conditions with the short term range supported by 114.5 and capped by 115.7. A break over range resistance brings new YTD highs into play but current price action implies another test of range support.
AUD/USD has rebounded strongly from 0.71 and went on to form new YTD highs over 0.73 to form a new uptrend. 0.728, the old resistance is now support, followed by 0.725. Next resistance is 0.74 to 0.745.
USD/CAD did not sustain its bullish breakout and reversed in the other direction to break lower from its former range, only for that to prove fake too. Price now sits above 1.27184 – the old range support in what remains a sideways range.
XAU/USD steadied at 1890 support after its steep sell-off from the highs over 1970 and is maintaining its uptrend while above an uptrend line and the 50 SMA on the 4-hour chart. The upside target is the 1970 peak, while a break of the trendline could see the price return to 1850.
BRENT has seen its uptrend accelerate away from the 50 SMA, forming higher highs and finding lows at the prior high. The dip under 110 could be the start of a more sizable correction after the big run-up. The 100 level is major psychological support.
US500 has held steady within a 100-point range between 4300 and 4400 since rebounding off the YTD lows. A break above the range would find first resistance at the 200 SMA. 4000 is major support should the downtrend resume.
Thank you very much for reading – and have a great week trading!
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