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Daily Pivots: (S1) 0.9162; (P) 0.9191; (R1) 0.9212; More....

Range trading continues in USD/CHF and intraday bias stays neutral first. 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) 1.3514; (P) 1.3567; (R1) 1.3599; More...

GBP/USD falls to as low as 1.3317 so far and broke 1.3356 support. Intraday bias stays on the downside for retesting 1.3158 low. Current development suggest larger decline from 1.4240 is still in progress. Firm break of 1.3158 will target 61.8% projection of 1.4248 to 1.3158 from 1.3748 at 1.3074 next. For now, risk will stay on the downside as long as 1.3485 support turned resistance holds, in case of recovery.

In the bigger picture, as long as 38.2% retracement of 1.1409 to 1.4248 at 1.3164 holds, up trend from 1.1409 (2020 low) is still in progress. On resumption, next target will be 38.2% retracement of 2.1161 to 1.1409 at 1.5134. Nevertheless sustained break of 1.3164 will argue that whole rise from 1.1409 has completed and bring deeper fall to 61.8% retracement at 1.2493.

Daily Pivots: (S1) 1.1283; (P) 1.1321; (R1) 1.1341; More...

EUR/USD falls to as low as 1.1147 so far today and intraday bias stays on the downside for 1.1120 low. Decisive break there will confirm resumption of larger down trend from 1.2348. Next target is 61.8% projection of 1.2265 to 1.1120 from 1.1494 at 1.0786. For now, risk will stay on the downside as long as 1.1287 support turned resistance holds, in case of recovery.

In the bigger picture, the decline from 1.2348 (2021 high) is seen as a leg inside the range pattern from 1.2555 (2018 high). Sustained trading above 55 week EMA (now at 1.1593) will argue that it has completed and stronger rise would be seen back towards top of the range between 1.2348 and 1.2555. However, 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.

Russia invasion of Ukraine remains the dominant theme in the markets today. Safe haven flow pushes gold to highest level in more than a year, marching towards 2k handle. WTI crude oil also surges pass 100 level, rising as it does in geopolitical tensions. In the currency markets, Yen and Dollar are overwhelmingly the strongest ones, followed by Swiss Franc. Euro and Sterling are the weakest together with Kiwi. Aussie and Loonie are weak too, but not as bad as Euro and the Pound.

Technically, Yen appears to have a slight upper hand against Swiss Franc in current risk aversion trade, with CHF/JPY dipping notably today. Immediate focus will be on near term trend line (now at 124.01), and 123.52 support. Firm break of this zone will complete a head and shoulder top pattern (ls: 125.48; h: 127.05; rs: 125.56). In this case, CHF/JPY would likely dive further to long term channel support (now at 120.23), before finding a bottom.

In Europe, at the time of writing, FTSE is down -2.84%. DAX is down -4.54%. CAC is down -3.90%. Germany 10-year yield is down -0.0843 at 0.145. Earlier in Asia, Nikkei dropped -1.81%. Hong Kong HSI dropped -3.21%. China Shanghai SSE dropped -1.70%. Singapore Strait Times dropped -3.45%. Japan 10-year JGB yield dropped -0.0110 to 0.187.

Gold to target 2074 high on upside acceleration

Gold's rally continues further today and powers through, 100% projection of 1682.60 to 1877.05 from 1752.12 at 1946.57. This is a clear sign of upside acceleration. In any case, outlook will stay bullish as long as 1913.79 resistance turned support holds. Next target is 161.8% projection at 2066.74, which is close to 2074.84 high.

Also, the chance of long term up trend resumption is increasing with current rally. On break of 2074.84, next medium term target will be 61.8% projection of 1160.17 to 2074.84 from 1682.60 at 2247.86.

WTI oil breaks 100 with upside acceleration, 107.4 next

WTI crude oil surges sharply as Russia started invading Ukraine, and it's now above 100 handle. For the near term, outlook will stay bullish as long as 95.98 resistance turned support holds. Next target is 61.8% projection of 66.46 to 95.98 from 89.23 at 107.43.

Note that 4 hour MACD clearly indicates that it's in upside acceleration. Firm break of 107.43 could prompt further acceleration to 100% projection at 118.75.

US initial jobless claims dropped to 232k, continuing claims dropped to 1.476m

US initial jobless claims dropped -17k to 232k in the week ending February 19, slightly below expectation of 239k. Four-week moving average of initial claims dropped -7k to 236k.

Continuing claims dropped -112k to 1476k in the week ending February 12, lowest since March 14, 1970. Four-week moving average of continuing claims dropped -49k to 1576k, lowest since June 30, 1973.

US GDP grew 7% annualized in Q4

According to second estimate, US GDP grew 7.0% annualized in Q4. The increase in real GDP primarily reflected increases in private inventory investment, exports, PCE, and nonresidential fixed investment that were partly offset by decreases in both federal and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

ECB Stournaras: Asset purchases should continue until end of the year

ECB Governing Council member Yannis Stournaras said in a Reuters interview that the asset purchase program should continue until at least the end of the year, to cushion the fallout from the Ukraine crisis.

He said, "judging the situation from today's point of view, I would rather favour a continuation of the APP at least until the end of the year, beyond September, rather than bringing the end closer... I wouldn't be in favour of announcing the end of APP in March."

Stournaras added that the crisis
was bound to depress prices "in the medium to long term" after an initial spike."In my view it is going to have a short-term inflationary effect – that is prices will increase due to higher energy costs," he said. "But in the medium to long term I think that the consequences will be deflationary through adverse trade effects and of course through the rise in energy prices."

BoJ Kuroda: No immediate plans to scale back stimulus

BoJ Governor Haruhiko Kuroda told the parliament, "unlike Western countries, we have no immediate plans to scale back our monetary stimulus." But the central bank will continue to look at inflation expectations. "We will look not just at price indicators, but also surveys showing how the public feels about price moves," he added.

On exchange rate, Kuroda said, "if the yen weakens further, that could push up import costs. But the recent rise in import costs is driven mostly by an increase in dollar-denominated raw material prices, rather than a weak yen."

"It's desirable for currency rates to move stably reflecting economic fundamentals. I think recent (yen) moves are in line with this trend," Kuroda added.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1283; (P) 1.1321; (R1) 1.1341; More...

EUR/USD falls to as low as 1.1147 so far today and intraday bias stays on the downside for 1.1120 low. Decisive break there will confirm resumption of larger down trend from 1.2348. Next target is 61.8% projection of 1.2265 to 1.1120 from 1.1494 at 1.0786. For now, risk will stay on the downside as long as 1.1287 support turned resistance holds, in case of recovery.

In the bigger picture, the decline from 1.2348 (2021 high) is seen as a leg inside the range pattern from 1.2555 (2018 high). Sustained trading above 55 week EMA (now at 1.1593) will argue that it has completed and stronger rise would be seen back towards top of the range between 1.2348 and 1.2555. However, 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.

Economic Indicators Update

According to second estimate, US GDP grew 7.0% annualized in Q4. The increase in real GDP primarily reflected increases in private inventory investment, exports, PCE, and nonresidential fixed investment that were partly offset by decreases in both federal and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

Full release here.

US initial jobless claims dropped -17k to 232k in the week ending February 19, slightly below expectation of 239k. Four-week moving average of initial claims dropped -7k to 236k.

Continuing claims dropped -112k to 1476k in the week ending February 12, lowest since March 14, 1970. Four-week moving average of continuing claims dropped -49k to 1576k, lowest since June 30, 1973.

Full release here.

ECB Governing Council member Yannis Stournaras said in a Reuters interview that the asset purchase program should continue until at least the end of the year, to cushion the fallout from the Ukraine crisis.

He said, "judging the situation from today's point of view, I would rather favour a continuation of the APP at least until the end of the year, beyond September, rather than bringing the end closer... I wouldn't be in favour of announcing the end of APP in March."

Stournaras added that the crisis was bound to depress prices "in the medium to long term" after an initial spike."In my view it is going to have a short-term inflationary effect – that is prices will increase due to higher energy costs," he said. "But in the medium to long term I think that the consequences will be deflationary through adverse trade effects and of course through the rise in energy prices."

The situation in Ukraine has deteriorated unfortunately after Russian armed forces attacked the country at around 4am UK time, and markets have reacted in the way we had expected. Russian stock markets have suffered their worst day on record, with the RTS Index plunging by more than 40 per cent today. The USD/RUB has rallied to a fresh record high of 90.00, before easing back as oil prices surged with Brent crude going through the $100 barrier to reach a high so far of nearly $105 per barrel. Global markets have also been shaken, with European stocks and US futures slumping, while safe-haven gold has rallied to $1950. The key question is where will the markets head from here and how and how traders could take advantage of all this volatility.

How severe will the economic sanctions be?

Western nations are promising to roll out further sanctions against Russia following the invasion. So far, the sanctions haven’t been too severe, but following the Russian invasion, surely, they will now respond more profoundly in an effort to really hurt the Russian economy. And that’s precisely why we have seen Russian stocks suffer a huge sell-off today. We simple do not yet know exactly how severe these sanctions will be or for how long, and what kind of a response we will get from Russia.

How to trade the volatility?

So, expect the markets to remain highly volatile and in an overall defensive mode. That said and given the gigantic moves in Russian and global assets, traders should be careful chasing the moves here as it could be that the markets have overreacted, and the worst-case scenario might be avoided after all. So, rather than chasing, conservative traders may wish to wait for pullbacks to potentially enter trades in the prevailing directions of the recent trends. More aggressive speculators may consider zooming into smaller time frames to find short-term, quick, opportunities. In any case, traders must be nimble as the markets are headline-driven and highly volatile. Investors, meanwhile, may also consider “bargain hunting” strategies to take advantage of downbeat prices of stocks that might be able to regain their poise quickly – perhaps energy names, miners and others that are not directly linked to Russia.

Gold heading to $2K?

Gold has been an obvious choice for investors of late amid heightened geopolitical risks concerning Ukraine, a struggling global stock market and soaring inflation. Inflation is also helping to keep real bond yields in the negative territory, making the non-interest-bearing gold and silver attractive on a relative basis for yield-seekers. Given gold’s breakout had already started several days ago in anticipation of a potential Russian invasion. With several key levels broken, there is not much in the way of resistance until just shy of $1960, the high from 2021, followed by the psychologically-important $2,000 level. The all-time high comes in at $2,075, hit in 2020. Key support is at around the $1900-$1920 range, which was previously resistance.

Crude oil breaks $100 barrier

Fears over supply disruptions have sent crude oil prices surging further higher. The Brent contract has paved the way for $105 after breaking through the $100 per-barrel-barrier with little effort. Dips back to support should hold until something changes fundamentally. But prices do appear severely overbought and there is a risk of a pullback in the not-too-distant future.  Once source of support could come in from expectations of higher Iranian exports. Iran’s foreign minister, Hossein Amirabdollahian, earlier this week said that he hopes outstanding issues in negotiations with world powers to restore the 2015 nuclear deal will be resolved in the “next few days.”

DAX breaks down amid global stock market rout

Thanks to the surging price of crude and gas prices, concerns over inflation has surged further higher. On top of this, there are fears of retaliation from Russia to western sanctions. Russia’s credit default swaps (CDS) have widened sharply, raising fears of contagion to other regions. Global stock markets have therefore slumped.  Keep an eye on the German DAX index, for it has broken several support levels, which could turn into resistance upon re-test – as per the chart:

The Australian dollar has reversed directions on Thursday, as AUD/USD is trading at 0.7172, down 0.86% on the day.

Ukraine invasion sends Aussie tumbling

The tense standoff between Russia and Ukraine which had been building for days exploded earlier today, as Russian forces launched an invasion of Ukraine. Details are still sketchy, but there are reports of Russian troops advancing on a number of fronts and there has been fighting around the capital Kyiv. There had been hopes that diplomatic moves could avert a military response, but these hopes were shattered as the Russians attacked while the UN Security Council was meeting on the Ukraine crisis.

The US and western European countries have promised to impose tougher sanctions on Russia, after slapping Moscow with limited sanctions barely 24 hours ago. The West could target Russian banks and cut them off the global financial network, and also impose export control rules which would prevent Russia from importing smart phones and other key products.

The spectre of the biggest war on European soil since 1945 has sent the financial markets sharply lower, as investors flee risk and look for safety. This has also weighed on the Australian dollar, which is sensitive to risk sentiment.

Australia CAPEX underperforms

Australian business investment for Q4 rebounded with a gain of 1.1%, after a reading of -1.1% in Q3. This was well short of the consensus of 2.5%, suggesting that Q4 GDP will be smaller than expected. The economy continues to improve, as consumer spending and employment have been pointing upwards.

Australian wage growth edged higher in the fourth quarter, rising 2.3% YoY, just shy of the consensus of 2.4%. With the pace of wage growth lagging behind inflation, which is around 3.5%, the RBA can continue to preach patience, although the markets are more hawkish and have priced in five rate hikes this year.

AUD/USD Technical

• With AUD/USD falling sharply, 0.7242 has strengthened in resistance.  Above, there is resistance at 0.7306
• There is support at 0.7100 and 0.7022

The dollar index was significantly higher on Thursday as Russian launches a military attack against Ukraine and investors flee to safety.

The greenback’s fate is pinned to the biggest components of the index, which are in defensive, with expectations for further fall that would continue to lift the US currency.

The index was up almost one percent on Thursday morning and hit the highest in three weeks, eyeing key barrier at 97.42 (2022 peak, posted on Jan 28).

Break higher (under the current conditions is seen very likely) would signal continuation of an uptrend from 89.15 (Jan 6 2021 low) and unmask pivotal Fibo resistance at 98.20 (61.8% of 103.80/89.15) fall, violation of which would expose targets at 100.00/100.35 (psychological / Fibo 76.4%).

Bullish technical studies on all larger timeframes add to dollar’s positive outlook, driven by negative geopolitical situation.

Res: 97.21; 97.42; 97.78; 98.20.
Sup: 96.70; 96.41; 96.12; 96.00.