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Market Wrap
Russian Foreign Minister Lavrov used very few positive words but what he did say showed there could be some light at the end of this very dark tunnel. The market reacted well to “there is always a chance for agreement”, though he was also clear to state that there is no way that talks will go on indefinitely. The Russians want a satisfactory resolution and soon. The yen and Swiss franc lost some of their shine as traders figured WW3 wasn’t happening today at least. Though the UK foreign ministry decided to keep up with the warnings of ‘Russia could invade at any moment’ and US intel says that Russia could surround Kyiv with 48-hours should military action actually occur.
The other focus away from the Ukraine and Russia were on the central bank speeches from Feds Bullard and ECB President Lagarde. The main call of a 100bps rate hike by July 1st still stands according to Bullard, though he is just “one man” and he will need to convince his colleagues. So maybe the FOMC meeting minutes will be a little less Hawkish? We’ll find out on Wednesday. There was another walk back with the need for inter-meeting rate hikes as he said that Fed Char Powell would be deciding on when the rate hikes will occur.
ECB President Lagarde said that the inflation target of 2% over the medium term is still there and that they will “take action” when the time is right. No doubt if the market were to decide the time is now to act the ECB would bend quicker, just as the Fed have. What we do know is that a rate hike will not happen before net asset purchases have concluded.
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The 1.13000 level that I had a target from last week has been found and traders have done a decent job of defending that level against any follow through. As we have such an unsettled market, I would advise on stepping aside for the time being and waiting to see which cohort wins. Currently the ActivTrader sentiment indicator is not signalling a decent contrarian reading and if Russia were to invade Europe there is nothing anyone could do to stop the EURUSD tumbling, so best to stay away for now.
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The energy complex is higher at the London close but has not done enough to turn the day green for WTI and Brent. UK Natural Gas is higher by 2.66% though and continued rising natural gas prices will keep prices of Oil rising too, as markets switch from one fuel that is far too expensive to a slightly cheaper one. The $94.20 on the Brent contract looks to be the first significant level of resistance and a breach of that could see the swing high taken and a move into the $95+ zone. Which is then just a small reach to the psychological $100 per barrel. The UAE energy minister said earlier that the driving force behind the price of oil was the geopolitical situation. Though analysts are quick to point out that the OPEC+ have been in a strict phase in the reduction of supply and there has been a lack of investment across the globe in bringing more wells on stream.
The ActivTrader sentiment indicator shows an extreme number of traders using the platform are bullish the pair.
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I am expecting a sweep of the 1.2800 level but with oil rising we could see the 1.2650 zone also be tested. Currently trading in this range is only good for those that trade back to the mean from the highs and lows of the channel between the two levels previously mentioned. If the EMAs could hint at the direction we should expect they would say the bulls have the edge currently as the 20, 50 and 200-period averages are stacked in a bullish manner.
