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A barrel of Oil on the spot market briefly topped $130 for Brent and $125 for WTI, having retreated to $127 and $121, respectively, by the start of European trading. Oil received its latest boost on expectations that the US will announce an embargo on Russian energy imports.

Traders took short-term profits on Biden’s speech, which kept Oil rising further. On the sellers’ side was also news that the UK was unable to repeat the US move and is instead set to halt energy imports from Russia before the end of the year. Biden also noted that many European countries would not stop buying Russian Oil and Gas any time soon because of their heavy reliance on them.

The latest comments have somewhat dampened pressure on the Oil price, as have earlier International Energy Agency calculations on ways to reduce Europe’s energy consumption from Russia by up to 80% as early as this year. Such plans often over-idealise the possibility of a coordinated effort, but their mere appearance has a stabilising effect on the market.

For its part, Russia has also worked to prove its role as a reliable energy supplier, loading Crude Oil at ports in line with the schedule.

Nevertheless, markets continue to face an increased risk premium, and Russian Oil struggles to find new buyers. The UAE and Saudi Arabia try to use the situation to their advantage, refusing to cooperate with the US to increase oil supplies. Iran is haggling for more favourable terms on the nuclear deal. Russia, the architect of the deal, has suddenly become an obstacle to it, demanding legal guarantees from the US that sanctions will not affect Russian-Iranian trade, thereby trying to thwart the US attempts to increase oil supply in countries where US sanctions limit production.

We would venture to guess that all existing conditions are already built into the Oil quotes, and its price is now near a ceiling for the coming weeks and months. From here, we could see the establishment of a fairly broad corridor of $95-130 per barrel for Brent for the foreseeable future. This is a vast range, reflecting the outlook’s persistence of extreme volatility and extreme uncertainty.

Daily Pivots: (S1) 115.36; (P) 115.58; (R1) 115.88; More...

Range trading continues in USD/JPY and intraday bias remains neutral. On the upside, firm break of 116.34 will resume larger up trend from 102.58 to 118.65 long term resistance next. On the downside, though, break of 114.40 will continue the corrective pattern from 116.34 with another fall to 113.46 support.

In the bigger picture, no change in the view that rise from 102.58 is the third leg of the up trend from 101.18 (2020 low). Such rally should target a test on 118.65 (2016 high). Sustained break there will pave the way to 120.85 (2015 high) and raise the chance of long term up trend resumption. This will remain the favored case as long as 55 week EMA (now at 111.64) holds.

Daily Pivots: (S1) 0.9258; (P) 0.9282; (R1) 0.9316; More....

Sideway trading continues in USD/CHF and intraday bias remains neutral. Choppy rise from 0.8925 would still be in favor to extend higher as long as 0.9090 support holds. Break of 0.9341 will target 0.9372 resistance and then 0.9471. On the downside, however, break of 0.9090 will bring deeper fall back to 0.8925 support.

In the bigger picture, medium term outlook will be neutral at best as long as 0.9471 resistance holds. Larger down trend could still extend through 0.8756 (2021 low). However, firm break of 0.9471 will argue that the trend has already reversed and rebound the rally from 0.8756 with another impulsive move.

Daily Pivots: (S1) 1.3074; (P) 1.3109; (R1) 1.3137; More...

Intraday bias in GBP/USD remains neutral for some consolidations. But upside of recovery should be limited by 1.3270 support turned resistance. On the downside, sustained break of 61.8% projection of 1.4248 to 1.3158 from 1.3748 at 1.3074 will extend the down trend from 1.4248 to 100% projection at 1.2658.

In the bigger picture, current development suggests that the up trend from 1.1409 (2020 low) has completed at 1.4248. Decline from 1.4248 could still be a corrective move, or it could be the start of a long term down trend. In either case, deeper decline would now be seen back to 61.8% retracement of 2.1161 to 1.1409 at 1.2493. In case, break of 1.3748 resistance is needed to indicate medium term bottoming, or outlook will stay bearish.

Daily Pivots: (S1) 1.0849; (P) 1.0903; (R1) 1.0958; More...

EUR/USD's recovery from 1.0805 extends higher today but outlook is unchanged. Intraday bias stays neutral first. While stronger recovery cannot be ruled out, upside should be limited by 1.1120 support turned resistance to bring down trend resumption. On the downside, firm break of 61.8% projection of 1.2265 to 1.1120 from 1.1494 at 1.0786 will pave they way to 100% projection at 1.0349 next. However, strong break of 1.1120 will bring stronger rebound back to 1.1494 structural resistance instead.

In the bigger picture, the decline from 1.2348 (2021 high) is expected to continue as long as 1.1494 resistance holds. Firm break of 1.0635 (2020 low) will raise the chance of long term down trend resumption and target a retest on 1.0339 (2017 low) next. Nevertheless, break of 1.1494 will maintain medium term neutral outlook, and extend range trading first.

Risk sentiment seemed to have improved drastically today. There are talks that both Russia and Ukraine are softening their tone, which might give an exit for Russia abandoning the invasion eventually. Germany DAX is leading major European indexes higher with more than 5% rebound. US futures also point to higher open. Both gold and oil dip too. In the currency markets, Euro is currently the strongest one for the day, followed by Aussie and then Kiwi. Yen is the worst performer followed by Dollar and Swiss Franc.

Technically, attention will be paid to how US stocks close today, particularly the volatile NASDAQ. A close above 13837.58 resistance would definitely be a positive sign. Further break of 55 day EMA in the coming days would suggest that correction from 162122 (or at least this falling leg of the corrective pattern) has completed, and turn near term outlook bullish for stronger rebound. Such development would also be reflected in the currency markets with sustainable rebound in Euro. However, failing to break through 13837.58 will keep status quo, at least for now, and indicate that risk sentiment remains fragile.

In Europe, at the time of writing, FTSE is up 1.64%. DAX is up 5.24%. CAC is up 4.73%. Germany 10-year yield is up 0.0721 at 0.187. Earlier in Asia, Nikkei dropped -0.30%. Hong Kong HSI dropped -0.67%. China Shanghai SSE dropped -1.13%. Singapore Strait Times rose 1.48%. Japan 10-year JGB yield rose 0.0121 to 0.167.

Gold back pressing 2k as rally lost momentum ahead of record high

Gold dips notably today, after failing to break through 2074.84 record high earlier. With the depth of the retreat, more corrective trading is now likely for the near term. While gold cold gyrate below 2000 handle, downside should be contained by 1960.83 support to bring another rally. Decisive break of 2074.84 will pave to way to next medium term target at 61.8% projection of 1160.17 to 2074.84 from 1682.60 at 2247.86.

However, break of 1960.83 support will delay the bullish case. Gold could then be in correction to rise from 1682.60 (the preferred case), or it's starting a third leg of the corrective pattern from 2074.84 (less preferred case). But both ways, Gold could have a test on 1877.80 support before setting on the next move.

Bitcoin extending triangle consolidation, back at 42k

Bitcoin is back at 42k handle over risk sentiment improves. Currently, price action from 33000 are seen as developing into a corrective pattern, probably in form of a triangle. Thus, upside of the current rebound should be limited by 45313 resistance. Eventually, larger decline from 68986 is still expected to resume through 33000 at a later stage. Nevertheless, firm break of 45313 will dampen this view and argue that the trend might be reversing.

RBA Lowe: A rate hike this year is plausible

RBA Governor Philip Lowe reiterated in a speech that Australia has the "scope to wait and assess incoming information" before working on interest rates.

He highlighted two issues that policymakers are "paying close attention to". The first is the "persistence of supply-side price shocks" and the extent of impact from Russia's invasion of Ukraine. Secondly, that's "how labor costs in Australia evolve".

He noted that "given the outlook, though, it is plausible that the cash rate will be increased later this year." There is both a risk to "waiting too long" and "moving too early". But Low finished with the point that "it is only possible to achieve a sustained period of low unemployment if inflation remains low and stable". And, "recent developments in Europe have added to the complexities here."

Australia Westpac consumer sentiment dropped to 96.6 in Mar, worst since Sep 2020

Australia Westpac consumer sentiment index dropped -4.2% to 96.6 in March, down from 100.8. That's the worst reading since September 2020, which was also the last time thee index was below the 100-level.

Westpac said: "The latest monthly fall comes as no surprise. The war in Ukraine; the floods in south- east Queensland and Northern NSW; ongoing concerns about inflation and higher interest rates were all likely to impact confidence, although the size of the decline is still notable."

Westpac maintained the view that the first RBA rate hike in the tightening cycle will start on August 2, following two more inflations reports of Q1 and Q2.

China PPI slowed to 8.8% yoy in Feb, CPI unchanged at 0.9% yoy

China PPI slowed from 9.1% yoy to 8.8% yoy in February, above expectation of 0.8% yoy. Senior National Bureau of Statistics statistician Dong Lijuan said, PPI was "affected by the increased commodity prices globally such as crude oil and non-ferrous metals".

CPI was unchanged at 0.9% yoy, above expectation of 0.8% yoy. affected by the Chinese New Year holiday and the fluctuation of international energy prices, CPI saw a bigger month on month increase," added Dong after CPI rose by 0.6 per cent month on month.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0849; (P) 1.0903; (R1) 1.0958; More...

EUR/USD's recovery from 1.0805 extends higher today but outlook is unchanged. Intraday bias stays neutral first. While stronger recovery cannot be ruled out, upside should be limited by 1.1120 support turned resistance to bring down trend resumption. On the downside, firm break of 61.8% projection of 1.2265 to 1.1120 from 1.1494 at 1.0786 will pave they way to 100% projection at 1.0349 next. However, strong break of 1.1120 will bring stronger rebound back to 1.1494 structural resistance instead.

In the bigger picture, the decline from 1.2348 (2021 high) is expected to continue as long as 1.1494 resistance holds. Firm break of 1.0635 (2020 low) will raise the chance of long term down trend resumption and target a retest on 1.0339 (2017 low) next. Nevertheless, break of 1.1494 will maintain medium term neutral outlook, and extend range trading first.

Economic Indicators Update

Bitcoin is back at 42k handle over risk sentiment improves. Currently, price action from 33000 are seen as developing into a corrective pattern, probably in form of a triangle. Thus, upside of the current rebound should be limited by 45313 resistance. Eventually, larger decline from 68986 is still expected to resume through 33000 at a later stage. Nevertheless, firm break of 45313 will dampen this view and argue that the trend might be reversing.

Gold dips notably today, after failing to break through 2074.84 record high earlier. With the depth of the retreat, more corrective trading is now likely for the near term. While gold cold gyrate below 2000 handle, downside should be contained by 1960.83 support to bring another rally. Decisive break of 2074.84 will pave to way to next medium term target at 61.8% projection of 1160.17 to 2074.84 from 1682.60 at 2247.86.

However, break of 1960.83 support will delay the bullish case. Gold could then be in correction to rise from 1682.60 (the preferred case), or it's starting a third leg of the corrective pattern from 2074.84 (less preferred case). But both ways, Gold could have a test on 1877.80 support before setting on the next move.

The New Zealand dollar has posted strong gains on Wednesday. NZD/USD is trading at 0.6841 in the European session, up 0.55% on the day.

Manufacturing Sales surge in Q4

Manufacturing Sales were outstanding in the fourth quarter, with a gain of 12.0%. This marked an impressive rebound from the -2.3% reading in Q3. Construction sales also soared by 16%. The strong numbers were a result of the easing of Covid lockdowns in the fourth quarter, as pent-up demand led to an upsurge in economic activity. We’ll get a look at another barometer of the manufacturing sector on Thursday, with the release of BusinessNZ Manufacturing Index. A strong reading would be another indication that the manufacturing sector is gaining strength.

The New Zealand dollar continues to show volatility, and as a risk currency it is vulnerable to haven flows to the US dollar. The war in Ukraine has raised risk aversion, as the West continues to slap sanctions on Moscow. On Tuesday, US President Biden announced a total ban on Russian energy imports, but EU members are unlikely to join, as Europe is much more dependent on Russian energy supplies than the US. At the same time, the kiwi is also a commodity-based currency and the surge in commodity prices has provided some support, as NZD/USD is up 1.0% in the month of March.

The Federal Reserve will almost certainly raise rates next week, likely by 25 basis points. With the turbulent economic landscape due to the Ukraine crisis and the staggering rise in oil prices, Fed policy makers have to also worry about stagflation. The Fed will have to be cautious about raising rates and not choking off economic activity, which means that we could see a slower timeline for raising rates than what the markets had anticipated only a few weeks ago.

NZD/USD Technical

• NZD/USD has support at 0.6802 and 0.6733
• There is resistance at 0.6931 and 0.7000

There was a sense of calm in the markets this morning, evidently on the back of remarks made by Russian Foreign Minister. But we are still inside the eye of the storm. Don’t let this apparent calmness fool you.

European stock indices and US futures roared back to life this morning, while gold slid 2% amid calmer risk tones as it backed away from August 2020 highs. There was no stopping Nickel though, as it continued its historic surge. The markets moved after Russia’s foreign minister, Sergei Lavrov, struck a conciliatory tone. He said:

1. Operation's Aims Do Not Include Overthrowing Ukrainian Government
2. It Would Be Better If Our Goals in Ukraine Are Achieved Through Talks

Talks are indeed always better than going to war, especially if there are no intentions of overthrowing the government. This might be a sign that Russia is blinking. But actions speak louder than words and Russia will have to do more than this. There is also the issue of trust, as this is the same people who told us that the troops on the Ukrainian border returned to base, only to then invade Ukraine shortly after.

Don’t forget that the US just yesterday decided to launch an all-out economic war against Russia, banning imports of oil and gas from the country. The UK has also announced it will phase out the import of Russian oil and oil products by the end of the year. There will be consequences: high gas prices, even more inflation and retaliation from Russia.

So, gold might be edging away from its record highs and stocks firmer, sentiment can turn negative very quickly. Volatile market conditions are not going anywhere until Putin ends the invasion of Ukraine.

For now, markets are relieved by the fact we haven’t had any fresh bearish news since yesterday’s announcement of a ban in oil imports from Russia. The markets were severely oversold, and any piece of good news would have always been amplified in terms of market reaction, which is what we have seen so far today. Also, let’s not forget that this is typical of a bear market when you sometimes see multiple percentage point gains in a short period of time as the shorts are squeezed, before the rally runs out of steam and the downward trend resumes.

Will it be another such scenario this time around? Time will tell. But for now, the markets are happy to buy downbeat stocks, especially as the ECB is seen dialling back its hawkish rhetoric tomorrow:

• Germany's Dax Up 5%, Set for Best Day Since May 2020
• Euro Zone Banks Extend Gains, Up Nearly 8%
• Nasdaq 100 Futures Extend Rally, up 2%, S&P Futures Up 1.6%