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Market Wrap
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The euro has been the clear winner all day as tensions in Ukraine ease a little. Even the slightest nudge in rhetoric away from all-out war was enough for the single currency to not only undo the 90% of yesterday’s price action it is also setting up for more of a continuation higher with the 1.1300 acting as a solid floor. Not only is the 1.1300 the heaviest traded level since November 2021, but it is also a psychological round number and lays in between the 50% and Fibonacci 61.8% retracement from the recent significant high and the most recent significant swing low. The price action when the EURUSD reached into the 1.1500 level shows that there has been a cohort of sellers waiting there to defend that level. A double top usually holds a lot of liquidity in the form of buy stops, a triple top just adds to that. When these get tripped or as price approaches them and traders puke their position, we could get an acceleration in the EURUSD to 1.15692 and towards the 1.1600 swing high from November.
The Japanese yen which had benefitted from flows during the most worrying hours has seen a decline in the forex heatmap today. With only the other safe-haven play, the Swiss franc trading weaker against the other currencies we follow.
The ActivTrader sentiment indicator suggests that we should be looking to short the yen as 75% of traders on the platform are currently short the USD and long the yen. This made sense yesterday and the day before, but I feel these guys are going to get squeezed out of their positions relatively soon.
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The double top around 116.336 is the target for me. But first I want to see if the 115.40 gets tagged before going higher or if there is something else in the news that drops the US dollar. Maybe the FOMC meeting minutes answers that.
The US Bureau of Labour Statistics released a report on Tuesday showing that producer prices grew by 1% in January compared to December. The price increase exceeded the expected 0.5%. The Producer Price Index (PPI) increased 9.7% year-over-year, higher than the predicted 9.1% increase.
The Core-Producer prices (excluding foods, energy, and trade services) grew 0.9% in January, the highest rise since January 2021. The year-over-year increase was 6.9%.
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German Chancellor Olaf Scholz and Russian President Vladimir Putin met today and said their two countries are “very close to each other” and described the dialogue as “very useful and meaningful.”
The Ger40 (DAX) sentiment indicator on the ActivTrader platform is edging towards the extreme levels of bullish sentiment. Using a line chart which is based off the daily closes there is a clear level of support around the 15,000 but that could also be the level that comes under attack again soon. The bulls at some point will run out of either the will or means to defend the big figure and we could then see a sharp push through their stops.
