Sample Category Title

EUR/USD

At the end of last week, the euro was sold off and the pair broke the support at 1.1400. The corrective phase has deepened and is currently limited by support 1.1330. The market is expected to remain undecided and a break of the main resistance at 1.1480 seems unlikely. The risk of conflict in Ukraine may plunge prices to the support at 1.1260, but it is possible the market will wait for the situation to develop. A return above 1.1400 would encourage the bulls for a new test at 1.1480. The first local resistance is the area around 1.1370. Today, an increase in activity can be expected around the speech of ECB's Christine Lagarde at 16:15 GMT.

USD/JPY

As the crisis in Ukraine grows, so does the demand for heaven assets. The pair sold out on the last day of last week and the bears tested the support at 115.00. Double tops at 116.30 limit the potential for growth and a convincing breakthrough will be needed to continue the uptrend towards 118.60. The bears are hesitant in today’s early hours and the pair formed the first daily resistance at 115.57. A break of 115.00 would strengthen the bearish sentiment in the market and this could pave the way towards the support at 113.84.

GBP/USD

The cable is currently above 1.3520, but the Bulls seem to be losing patience after several failures to break the resistance at 1.3616. Sentiments at the beginning of the week are neutral as a break of 1.3520 would lead to sell-offs towards 1.3430. The main support from the higher time frames is 1.3370 and in the coming days the market may remain volatile, but without a clear direction. To continue the momentum to 1.3750, the bulls will first have to overtake the zone around 1.3616.

EUGERMANY40

The German index failed to hold last week's gains and after the sell-off prices approached the support at 15075. It is possible for the bulls to test the resistance at 15300 and, if the zone is breached, the next target for them would be 15460. Seasonality supports bullish scenarios and reversal of the movement from the current levels has the potential to reach the resistance at 15722. Until this zone is cleared, the opportunities for gains remain severely limited. If the bearish pressure continues and the zone at 15075 is broken, a new test of the zone around 14800 is possible. This support has been holding the market since March last year, its role is key and a breach here could send the market crashing towards 14130.

US30

The US30 also sold out late last week, with the index breaking several supports on the way, the most significant of which is at 35065. In the early hours of today, prices are hovering around the support at 34785. They are likely to bounce back from that level and test the breach at 35065. If the zone is cleared, the recovery may continue to 35340. Several risks weigh on the market, such as inflation in the US, the Federal Reserve and the crisis in Ukraine, and currently gains are likely to be capped. A new wave of sell-offs could plunge prices to 34420, however the main support for the bulls remains at 33800. The uptrend on the highest time frames seems to be broken,and a breach of 33144 would confirm the reversal of the main direction of the market.

The Dow Jones 30 struggled as white-hot US inflation fanned fears of aggressive rate hikes.

Nonetheless, a break above the 30-day moving average on the daily chart indicates improved market sentiment. An overbought RSI prompted momentum traders to exit.

A fall below 34820 would suggest lingering hesitation among market participants and shake out weak hands. The bulls may see a pullback towards 34500 as a buying opportunity. The rebound may only resume if the price lifts offer around 35400.

The pound may find support from Britain’s upbeat GDP in Q4. A break above January’s high at 157.70 suggests that the bulls have reclaimed control of price action.

The next challenging task is to push above last October’s peak at 158.20. This would resume the uptrend in the medium term.

In the meantime, a combination of profit-taking and fresh selling is driving the price towards 155.20. Sentiment would remain steady as long as the sterling met bidders in this demand area.

The US dollar rises as traders seek safe haven amid tensions in Ukraine. The pair is grinding up along a rising trendline from support at 0.9180.

A series of higher lows suggests strong buying interest. A break above the intermediate resistance at 0.9275 may boost buyers’ confidence further.

0.9310 is the next hurdle and its breach would bring the greenback to the double top (0.9370) on the daily chart. On the downside, the trendline is the closest support, and then 0.9180 is a critical level to keep the short-term rally intact.

Markets

Souring risk sentiment during Friday’s US trading session eventually offered some relief for ailing US Treasuries. Ahead of late-session, safe haven rebound, the US Note future approached the post-CPI sell-off low after Michigan consumer confidence showed consumers expecting a 5% inflation rate over the next year. The headline index fell to the lowest since October 2011 as the combination of persistent price pressure, a potentially less supportive fiscal stance and a tighter monetary policy all dampen growth perspectives.

In yield terms, the US 10-yr yield failed a sustained break above the psychologic 2% mark in the weekly close. US stocks were already trading heavy before sinking after US National Security Adviser Jake Sullivan said that Russia could initiate military action even before the end of the Winter Olympics (February 20). He added that it can take a variety of forms. It could be more limited, it could be more expansive, but there are very real possibilities that it will involve the seizure of a significant amount of territory in Ukraine and the seizure of major cities including the capital city.

Main US equity indices eventually lost 1.4% (Dow) to 2.8% (Nasdaq). The S&P 500 closed below the 4451.5 neckline of a short term double top formation, suggesting a return to the 4222.62/4278.94 support zone (YTD sell-off low & Oct2021 low). Brent crude rose from $90.5/b to $95.5/b.

US yields dropped by 7.7 bps (2-yr) to 9.6 bps (5-yr) with the belly of the curve outperforming the wings. The German yield curve still showed a small bear steepening move (0.5 bps for 2-yr; +2.1 bps for 30-yr) because of the timing of the move (after European close). A catch-up move can be expected at today’s opening.

Peripheral spreads extended their post-ECB widening trend, adding up to 5 bps for Greece and Italy even as ECB members keep pushing back against very aggressive market pricing regarding policy rates.

Irish ECB member Makhlouf in an interview with the FT this weekend for example said that the idea of hiking interest rates in June looks very unrealistic. “There’s a bit of difference between the calendar we’re working to and the one some market participants may have in mind.”

The dollar outpowered the euro in the late risk-off spell with EUR/USD closing at 1.135 from an 1.1428 open. The trade weighted dollar managed a first close above the 96 big figure since February 1^st. USD/JPY fell from the 116.25 resistance area to 115.33 currently, with JPY obviously the stand-out safe haven currency. EUR/GBP strangely enough followed the EUR/USD move south, to close 0.837 from an 0.8428 open. Risk aversion remains dominant in Asia this morning. The eco calendar is empty suggesting it will be so for the rest of the session.

News Headlines

Members of the ruling Polish Law and Justice Party submitted a bill to the Parliament to change a disciplinary chamber of judges that is at the core of the dispute with the EU over the rule of Law. Under the proposed bill, cases of disciplinary action against judges would be transferred to the Supreme Court. The disciplinary chamber will continue to exist but only handle cases involving other legal professions. According to the justification of the bill, the proposal complies with all facets of the Court of Justice of the EU. The proposal probably won’t be considered as a final answer by the EU but could be a basis for further negotiations. The raft between the EU and Poland on rule of law was an obstacle in executing Poland’s €36bn support of the Next Generation EU Recovery package. Last week, Poland’s President Duda also indicated that it wasn’t opportune for Poland to continue this dispute given the international tensions around Ukraine.

Rating agency Fitch further cut the credit rating of Turkey into junk territory. The agency lowered the country’s foreign currency issuer default rating to B+ from BB-. The outlook remains negative. According to the agency’s statement ‘Policy-driven financial stress episodes of higher frequency and intensity have increased Turkey's vulnerabilities in terms of high inflation, low external liquidity and weak policy credibility’. Fitch does not expect the authorities' policy response to reduce inflation, including FX-protected deposits, targeted credit and capital flow measures, will sustainably ease macroeconomic and financial stability risks.’

Daily Pivots: (S1) 1.1308; (P) 1.1370; (R1) 1.1409; More...

Intraday bias in EUR/USD remains neutral for the moment. Further rise will remain mildly in favor as long as 1.1265 minor support holds. On the upside break of 1.1482 will target 38.2% retracement of 1.2348 to 1.1120 at 1.1589 next. Sustained break there will argue that whole fall from 1.2348 has completed too and target 61.8% retracement at 1.1879. On the down, however, break of 1.1265 support will dampen this bullish view and bring retest of 1.1120 low instead.

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 1.1613) 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.

Daily Pivots: (S1) 1.3515; (P) 1.3562; (R1) 1.3609; More...

Intraday bias in GBP/USD remains neutral for the moment. On the upside, break of 1.3642 will resume the rebound to 1.3748 resistance. Firm break there will revive the bullish case that correction from 1.4248 has completed with three waves down to 1.3158. Further rally should then be seen to retest 1.4248 high. On the downside, however, break of 1.3356 will bring retest of 1.3158 low.

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) 0.9226; (P) 0.9256; (R1) 0.9274; More....

Intraday bias in USD/CHF remains neutral, at this point as range trading continues. Overall, further rally is mildly in favor as long as 0.9090 support holds. On the upside, break of 0.9372 will resume the choppy rally from 0.8925 to 0.9471 high. However, break of 0.9090 will turn bias back to the downside for 0.8925 support instead.

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) 114.91; (P) 115.55; (R1) 116.07; More...

Intraday bias in USD/JPY remains mildly on the downside at this point. Corrective pattern from 116.34 is in its third leg. Deeper fall would be seen to 114.14 support first. Break will target 113.46 next. On the upside, firm break of 116.34 will resume larger up trend from 102.58. Next target is 118.65 long term resistance.

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 111.21) holds.

Daily Pivots: (S1) 0.7128; (P) 0.7188; (R1) 0.7229; More...

Intraday bias in AUD/USD remains neutral for the moment. Further rise would remain in favor as long as 0.7050 support holds. Above 0.7247 will target 0.7313 resistance. Decisive break there argue that correction from 0.8006 has completed at 0.6966, after hitting 0.6991 key support. Outlook will be turned bullish for 0.7555 resistance next. On the downside, however, break of 0.7050 support will bring retest of 0.6966 low instead.

In the bigger picture, focus remains on 0.6991 key structural support. Sustained break there will argue that the whole up trend from 0.5506 might be finished at 0.8006, after rejection by 0.8135 long term resistance. Deeper decline would then be seen back to 61.8% retracement of 0.5506 to 0.8006 at 0.6461. Meanwhile, strong rebound from 0.6991 will retain medium term bullishness. That is, whole up trend from 0.5506 is still in progress.