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EUR/USD

The beginning of the week started with the European currency attempting to restore its positions against the dollar. After the market opened, the euro's attempt at breaching the resistance at 1.0936 was unsuccessful. If the bulls try to breach this level for a second time and succeed in doing so, then the next level of resistance they have to overcome is 1.0982. If they fail to stay above it, however, then the bears would once again prevail and head the price towards the support at 1.0845. For now, the mentioned level is managing to resist the pressure, but the market mood remains negative. The important news that is expected to come out this week is the change in the U.S. Federal Reserve's key interest rate.

USD/JPY

The Japanese yen continues to lose ground against the U.S. dollar. The resistance at 117.00 was easily overcome on Friday and opened the way for the bulls towards the next one in the area at around 118.04. In the opposite direction, the main support is the level at 117.00. Even if it is successfully overcome, however, the return of the bears is still unlikely. So far, sentiment for the U.S. dollar remains positive.

GBP/USD

So far, the price of the currency pair manages to stay below the resistance at 1.3099. The bears are in full control of the market and have successfully overcome the level at 1.3025, with their next target expected to be the support at 1.2978. If the bulls manage to return to the market, then their first goal should be to overcome the resistance at 1.3099. Given the negative mood, however, the movement is more likely to continue its decline.

EUGERMANY40

The German index is currently recovering and successfully holding above the support at 13345. However, this consolidation may only be temporary given the precarious situation in Ukraine. If the bulls' attempt to breach the resistance at 13800 is unsuccessful, then the bears may once again prevail. If this happens and they overcome the support at 13345, then we may witness a new sell-off wave towards the next major level of 13093.

US30

Last week was successful for the U.S. blue-chip Index as it managed to stop its fall by forming a range between the levels of 32360 and 34100. At the time of writing the analysis, the price is located at 33072 and the bears are more likely to test the support level at 32930. If the resistance at 33330 is overcome, however, then it would be a signal that the bulls are returning to the market. In addition to any news regarding the war in Ukraine, other important economic data that is expected to come out this week and that could affect the index price is the change in the U.S. Federal Reserve's key interest rate and in that of the Producer Price Index (again for the U.S.).

The FTSE 100 recoups losses as Britain’s GDP beat expectations in January. The rebound has gained traction after it broke above 7200.

After a brief pause, the index met buying interest over 7050 and a bullish MA cross indicates an acceleration to the upside. Sentiment remains cautious from the daily chart perspective though and the bears could be waiting to sell into strength.

7450 at the origin of the latest sell-off is a major hurdle as its breach could turn the mood around. Otherwise, there could be a revision of 6800 soon.

The euro continues upward after the ECB left the door open to an interest rate hike. A pop above 128.60 has prompted sellers to reconsider their bets.

However, traders can expect strong bearish pressure in the supply zone around 129.20. This level overlays with the 20-day moving average, making it a congestion area.

An overbought RSI has tempered the initial comeback and the bulls need to consolidate their positions before they could push further. 126.50 is key support and 124.40 a second line of defense to keep the pair afloat.

The Canadian dollar surged after a sharp drop in February’s unemployment rate. A break above the recent peak at 1.2875 has consolidated the US dollar’s lead.

The RSI’s repeatedly overbought condition has led to some profit-taking. As the indicator swung into the oversold area, a pullback attracted bargain hunters in the demand zone between 61.8% (1.2700) Fibonacci retracement level and 1.2680.

A rally above 1.2840 may resume the rally and send the pair to December’s high at 1.2960.

Market movers today

We start the week in a quiet fashion on the data front, but for markets developments in the Ukraine war and commodity prices will remain the key focus.

US national security adviser Jake Sullivan and China's top foreign policy official Yang Jiechi will meet in Rome for the first US-China high-level in-person talks since the war started.

Swedish inflation figures for February are due and we look for CPIF at 4.3% (0.7% m/m) and CPIF ex energy at 3.2% (0.8% m/m), slightly higher than the consensus calls and substantially higher than the Riksbank's forecasts.

Later this week, the highlight will be the Fed meeting on Wednesday and Bank of England meeting on Thursday and we expect both to hike policy rates by 25bp.

The 60 second overview

Russia/Ukraine war: Both Russia and Ukraine have expressed optimism that peace talks have made progress and that results could materialize in the coming days. The fourth round of talks begin today. Over the weekend, Russia bombed a Ukrainian base close to the border of NATO member Poland, see Reuters. The target was supposedly weapons supplied by foreign nations.

US and China will meet today in high-level talks. In an interview, last night, US national security adviser Jake Sullivan said that while China "was aware" that Putin was planning something, Beijing "may not have understood the full extent of it". He also warned China not to try to 'bail out' Russia and circumvent sanctions. According to FT, Russia has asked China for military help in Ukraine but the story did not provide any details. IMF head Kristaline Georgieva said on Sunday, that 'we no longer think of Russian default as improbable' but added that it would not trigger a financial crisis.

Oil: US will not negotiate Ukraine-related sanctions with Russia to save Iran deal, WSJ. Talks were suspended on Friday but EU's foreign policy chief Borell tweeted that a final text is essentially ready and on the table. Oil prices have stayed below USD110 per barrel unchanged from late last week.

China lockdowns: Battling the biggest outbreak since the pandemic started, the major cities of Shenzhen and Shanghai have moved into partial lockdowns. China has reported more than 1,000 local cases in recent days, see chart. The lockdowns are likely to impede supply chains for major manufacturers as the two cities are home to a large amount of both domestic and foreign companies.

Equities: Equities in massive roller-coaster ride on Friday with European stocks sticking out on the positive side as a Putin comment on progress in talks with Ukraine boosted stocks half way through the cash session. US and Asia lower and hence global indices lower after some heavy lifting earlier in the week. Bond yields ticked higher Friday and lifting value stocks. In US, Dow -0.7%, S&P 500 -1.3%, Nasdaq -2.2% and Russell 2000 -1.6%. Asian markets very mixed this morning with Japan higher while China led by tech is selling off massively. European and US futures higher this morning as reports on Sunday said that both Russia and Ukraine were seeing some sort of progress in talks.

FI: Yields declined modestly on Friday and the curves flattened from the long end given the increased risk of recession in the Eurozone. Furthermore, there was modest tightening of the 10Y BTPS-Bund spread and the Bund ASW-spread widened despite the hawkish ECB statement on Thursday last week.

FX: The sell-off towards the end of last week weighed on the notorious risk sensitive Scandi-currencies while also the EUR traded on the back-foot with EUR/USD moving back towards the 1.09 mark. USD/RUB continues to trade just north of 130 on screens.

Credit: Friday was another day of cash bond outperformance relative to CDS indices. iTraxx Xover tightened 1bp while Main widened 0.4bp. HY bonds tightened 5bp and IG 2bp

Nordic macro

Sweden: Inflation figures for February are released today. We expect the SEK depreciation of these past months to add to imported inflation pressures, yielding an extra 0.2 percentage points on top of the "normal" February pattern to both core and headline inflation this time around, where we forecast CPIF at 4.3% (0.7% m/m) and CPIF ex energy at 3.2% (0.8% m/m), slightly higher than the consensus calls and substantially higher than the Riksbank's forecasts. Additionally, we expect rising food prices to add to inflation pressures in coming months, as the warning signs are already there both from abroad but also domestically, although it has failed to materialize in Sweden thus far.

Daily Pivots: (S1) 152.11; (P) 152.76; (R1) 153.57; More...

Intraday bias in GBP/JPY remains neutral for the moment, and further decline is expected with 155.20 resistance intact. On the downside, break of 150.95 will resume the fall from 158.04, as the the third leg of the consolidation pattern from 158.19, to 148.94 support. However, firm break of 155.20 will bring stronger rise back to 158.04/19 resistance zone.

In the bigger picture, price actions from 158.19 are seen as developing into a consolidation pattern to up trend from 123.94 (2020 low). Downside should be contained by 38.2% retracement of 123.94 to 158.19 at 145.10 to bring rebound. Firm break of 158.19 will resume the up trend to long term fibonacci level at 167.93. However, sustained break of 145.10 will raise the chance of trend reversal and target 61.8% retracement at 137.02.

Daily Pivots: (S1) 127.39; (P) 128.22; (R1) 128.86; More....

Intraday bias in EUR/JPY remains neutral at this point. On the upside, sustained trading above 55 day EMA (now at 129.30) will argue that correction from 134.11 has completed, and bring stronger rally to retest this high. On the downside, though, below 126.28 minor support will turn bias back to the downside for 124.37 support.

In the bigger picture, outlook is neutral at best for now until there is clear sign of up trend resumption. Corrective pattern from 134.11 could still extend further, sideway or downward. Break of 124.37 will target 61.8% retracement of 114.42 to 134.11 at 121.94.

Daily Pivots: (S1) 0.8349; (P) 0.8384; (R1) 0.8407; More...

Intraday bias in EUR/GBP remains neutral at this point. On the upside, above 0.8434 will target 0.8476 structural resistance first. Firm break there will carry larger bullish implication and target 0.8598 resistance next. On the downside, break of 0.8315 minor support will retain near term bearishness, and bring retest of 0.8201 low.

In the bigger picture, the down trend from 0.9499 is expected to continue as long as 0.8476 resistance holds. Sustained trading below 0.8276 support will argue that the whole up trend from 0.6935 (2015 low) has reversed. Deeper fall should be seen to 61.8% retracement of 0.6935 to 0.9499 at 0.7917 next. However, firm break of 0.8476 will indicate medium term bottoming at least. Focus will be back on 55 week EMA (now at 0.8534) for more evidence of bullish reversal.

Daily Pivots: (S1) 1.4900; (P) 1.4987; (R1) 1.5051; More...

Intraday bias in EUR/AUD remains neutral for the moment. With 1.5354 support turned resistance intact, further decline is still expected. On the downside, below 1.4789 minor support will turn intraday bias back to the downside for 161.8% projection of 1.6343 to 1.5354 from 1.6223 at 1.4476. However, sustained break of 1.5354 will bring stronger rise back towards 1.6623 resistance.

In the bigger picture, fall from 1.9799 is seen as a long term impulsive move. Next target is 61.8% projection of 1.9799 to 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). Some support could be seen there to bring interim rebound. But overall, break of 1.5354 support turned resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of recovery.

Daily Pivots: (S1) 1.0168; (P) 1.0224; (R1) 1.0260; More....

Intraday bias in EUR/CHF stays neutral for the moment. With 1.0298 support turned resistance intact, outlook remains bearish for further decline. On the downside, below 1.0131 minor support will bring retest of 0.9970 low first. On the upside, however, sustained break of 1.0298 will bring stronger rebound towards 1.0610 structural resistance instead.

In the bigger picture, long term down trend from 1.2004 (2018 high) is still in progress. Next target is 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650. Firm break there will target 100% projection at 0.9650. In any case, break of 1.0505 support turned resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will remain bearish.