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Market movers today

Everything is still about the Russian invasion of Ukraine and we continue to expect volatile markets near-term. Today, the peace negotiations between Russia and Ukraine continue but with the war continuing we are not sure they will be successful. Markets are seemingly stabilising but risk sentiment remains fragile to any negative news.

Besides that Fed Chair Jerome Powell testifies before lawmakers today. We expect him to signal that tightening is still needed despite elevated uncertainty. Rising commodity prices do not make things easier for the Fed.

Preliminary euro area HICP inflation in February is due out today. We expect inflation accelerated to 5.9% y/y but focus right now is on possible negative consequences on the euro area economy from the Russian invasion and Western sanctions.

Today ECB's chief economist Lane will speak at 17:00 CET on the outlook for the economy, inflation and monetary policy. This is the last chance ahead of next week's ECB meeting to guide markets, as the silent period starts tomorrow.

OPEC+ meets today and looks set to raise output by another 400kb/d.

Danish FX reserves data for February are due out at 17:00 CET.

We expect Bank of Canada to hike the policy rate to 0.50% today, which is also the consensus view.

The 60 second overview

Markets stable overnight: Financial markets have not moved much overnight after risk appetite took a hit again yesterday with especially European equities down and German 10-year yields falling more than 10bp. EUR/USD is broadly flat after dipping below 1.11 yesterday. Oil prices have continued higher reaching USD110 per barrel Brent oil in Asian trading.

Russia/Ukraine war: Russian forces are stepping up their attack on Ukraine and according to Pentagon 80% of troops amassed at the border before the attack has entered Ukraine. A military convoy stretching dozens of miles was heading towards Kyiv yesterday. British military officials said a column of heavy armour had moved to within 30 km of Kyiv. It carried rockets that can reach urban areas of the city.

More sanctions/boycotts: EU last night voted to exclude some Russian banks from Swift but spared the biggest bank Sberbank to ensure energy payments can be made, see Bloomberg. More companies have joined a boycott: Apple, ExxonMobil and Boeing are suspending sales and operations in Russia.

IEA members release oil reserves: The International Energy Agency (IEA) yesterday announced that its' members will release 60 million barrels of oil to stem the rise in oil prices. They also said they will consider "possible additional emergency oil stock draws, as needed". However, oil prices moved higher after the announcement as traders had expected a bigger release. As many banks and ship owners refuse to handle Russian oil at the moment an oil trader estimated around 70% of Russia's oil exports are finding no buyers, see FT.

Biden State of the Union: Three themes dominated Biden's State of the Union speech last night: Russia's aggression against Ukraine, fighting inflation and the corona pandemic. He announced the US would be "closing off American airspace to all Russian flights" and warned of further sanctions saying about Putin "he has no idea what's coming".

Equities: Equities were lower yesterday with a more or less 100% war driven performance. Energy the only sector higher yesterday as the oil price exploded upwards. Europe have the closest ties to Russia and hence no surprise to see European equities underperforming as the war in Ukraine intensifies and uncertainty increases. Defensives continue their massive outperformance of cyclicals. Despite lot of action in equities, the main focus should actually be on bond markets yesterday as the flight to safety made high rated government bond yields plunge across the curve. Banks took another heavy beating with the massive drop in bond yields. VIX ticked higher, closing the day just north of 33.

In US yesterday Dow 1.8%, S&P 500 -1.6%, Nasdaq -1.6% and Russell 2000 -1.9%. The negative sentiment continuing in Asia this morning with most markets being lower. US futures are a little higher this morning just as US bond yields. The picture in Europe is a little more mixed.

FI: It was another dramatic day in the global bond markets as yields "collapsed" with the 10Y German government bond yield declining some 21bp and the German ASW-spreads continued to widen. Hence, it looks as the traditional safe-haven flows whether Bunds and Treasuries outperform other government bonds. However, 10Y BTPS rallied some 30bp and the spread has tightened some 20bp since last week. We expect that the spread tightening is partly due to the expectations that ECB will postpone the rate hike as well as continuing the QE (we still believe in the rate hike in late Q4). This was also seen by the comments from ECB's Rehn, that ECB should not exit stimulus before assessing the impact of the war.

FX: EUR/USD continued lower yesterday and is trading close to 1.11 this morning. Oil prices have hit USD110/barrel, which is a headwind for EUR. CHF is benefitting amid elevated uncertainty and tough sanctions and EUR/CHF is now below 1.0220.

Credit: The Russian invasion of Ukraine and yesterday's added rhetoric on escalations of both sanctions and threats caused the risk appetite in the credit market to remain very low. Itraxx main widened 4.6bp to 75.6bp while xover widened a full 33.4bp to 278.5bp. Cash remains illiquid and bonds from companies with Russian exposure struggles to find any bids.

EUR/USD

The currency pair failed to overcome the resistance at 1.1232 and was strongly sold off with the opening of European markets. Support at 1.1180 has been breached and the bears are testing the bottom again at 1.1107. Prices have failed to bounce off the zone and it is possible that it will be cleared as well. In such a scenario, a new wave of sell-offs is possible, aimed at testing support at 1.1000. Today, a second round of talks is expected between Ukraine and Russia, and with favorable developments, the bulls may return to the market, but while prices are below 1.1290, expectations remain negative. Today, the significant events in the economic calendar are the Eurozone preliminary CPI at 10:00 GMT and the testimony of chairman Powell in front of Congress at 15:00 GMT. However the situation in Ukraine remains a leading factor in market development.

USD/JPY

The resistance at 115.73 was tested once again, and the bears confirmed their intention to maintain their positions. It is likely that the market will continue to trade in the range between support at 114.50 and resistance 115.73. At the moment, the mood is mixed and prices do not find a clear direction.

GBP/USD

Like the euro, the sterling also started the month in the red. The resistance at 1.3434 was tested once again and briefly after a massive sell-off followed. The bottom at 1.3271 has not yet been tested, but the low presence of bulls suggests that such a test is possible. The market shows divergence and if the support at 1.3270 is not cleared, a complex pullback is likely to develop. Prices remain in bears territory until the resistance at 1.3600 is broken. In case of breaking the 1.3270 support, a drop to the next support at 1.3200 is possible.

EUGERMANY40

The German index tanked yesterday and it was one of the worst performing markets. Prices tested again the weekly support at 13800 and briefly managed to violate it. Given the extreme negativity, a strong bounce from the 13800 zone is possible, with the first serious resistance being 14450. If the weekly support is broken, the next zones with the potential to limit the declines are 13630 and 13250. Should prices return above 14450 sentiment would improve significantly, however a suitable catalyst would be needed.

US30

Despite yesterday's declines the US blue chips are performing better than their European peers. The area around 34050 has already been tested several times and if the structure is cleared a strong rally is expected with potential targets being at 34520 and 35010. The first support for the day is 33150, and if it is violated the next one is around 32800-32700. Jerome Powell is expected to testify before the Congress today at 17:00 EET and there may be an increase in volatility during the event.

The Canadian dollar clawed back losses after the Q4 GDP beat expectations. A jump above 90.70 has prompted sellers to cover their bets, opening the door for a potential reversal.

91.10 is the next resistance and its breach could propel the loonie to this year’s high at 92.00. On the downside, the psychological level of 90.00 is a key support to keep the rebound relevant.

Otherwise, a drop to 89.30 would suggest that sentiment remains fragile. In turn, this would place the pair under pressure once again.

The Australian dollar steadied after the RBA warned that energy prices could flare up inflation.

A break above the previous high (0.7285) shows buyers’ strong commitment despite sharp liquidation. Sentiment swiftly recovered and may attract more buying interest. An overbought RSI may temporarily limit the upside. And the bulls could be waiting for a pullback to accumulate.

0.7220 is the closest support. A bullish close above the January peak at 0.7310 could initiate a reversal in the medium-term and extend gains towards 0.7400.

Gold recovered after the first round of peace talks between Ukraine and Russia ended without a resolution. The precious metal found support over 1885.

The rising trendline from early February indicates that the general direction is still up despite a choppy path. The previous peak at 1974 is now a fresh resistance and its breach could send the price to the psychological level of 2000.

The downside risk is a fall below the said support. Then 1852, near the 30-day moving average, would be the bulls’ second line of defense.

Daily Pivots: (S1) 1.1065; (P) 1.1149; (R1) 1.1208; More...

Intraday bias in EUR/USD is back on the downside as fall from 1.1494 resumes by breaking 1.1105 temporary low. Current down trend from 1.2348 should target 61.8% projection of 1.2265 to 1.1120 from 1.1494 at 1.0786. On the upside, break of 1.1273 resistance is needed to be the first sign of bottoming. Otherwise, outlook stays bearish in case of recovery.

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.

Daily Pivots: (S1) 1.3272; (P) 1.3355; (R1) 1.3407; More...

Intraday bias in GBP/USD stays neutral first and further decline is expected with 1.3485 support turned resistance intact. On the downside, break of 1.3272 will target 1.3158 low. Further break there will resume larger down trend from 1.4248. However, firm break of 1.3485 will dampen this bearish view and turn bias back to the upside for 1.3641 resistance.

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) 0.9158; (P) 0.9181; (R1) 0.9213; More....

Intraday bias in USD/CHF remains neutral as range trading continues. 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) 114.64; (P) 114.96; (R1) 115.23; More...

Intraday bias in USD/JPY remains neutral as range trading continues. 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) 0.7232; (P) 0.7261; (R1) 0.7283; More...

Intraday bias in AUD/USD remains mildly on the upside, as rise from 0.6966 is resuming for 0.7313 resistance. Decisive break of 0.7313 resistance will 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, break of 0.7093 will bring retest of 0.6966 support 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.