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Midday Update
The investor’s sentiment was upbeat early Tuesday ahead of diplomatic talks between Ukraine and Russia in Turkey today. Markets are pricing in a possibility of a cease-fire negotiation, while Russian President Vladimir Putin has a scheduled call with French President Emmanuel Macron later today.
The US Dollar retreated from monthly highs as President Biden unveils a tax plan targeting billionaires and companies dubbed the “wealth tax”. Volatility is expected as large FX options expire at the close of the 1st quarter of 2022.
The USDJPY trimmed gains by -0.29% after hitting the August 2015 high at 125.00 on Monday. The bullish momentum took a halt after 4-weeks of rising boosted by a policy divergence between the Bank of Japan and the Fed.
The USD is weighed down post-BoJ deputy governor Amamiya’s defense of the ultra-loose monetary policy stance and the emerging tax plan by the Biden administration. The pair take a corrective pattern towards 122.00 near-term resistance turned support. Investors watch Japanese yen retail sales due for release on Wednesday.
The AUDUSD edged higher adding +0.13% parring Monday losses as bulls advance towards 0.7550 near-term resistance. The AUD strengthens post positive preliminary Retail sales for February ahead of US JOLTS Job opening for February and CB consumer confidence scheduled for release during the New York session.
FOMC members, William and Harker will be speaking later in the day and traders should pay attention to possible volatility. A failure to break above 0.7550 may cause selling pressure on the pair and the critical zones to watch out for support are at 0.7440 and 0.7400.
The EURCHF extended gains by +0.74%, as bulls climbed higher for the second day after finding bouncing off 1.0200 support. Upside gains are capped by a near-term resistance at 1.0400 and a break above that area may reinforce a stronger bullish momentum that may cause EURCHF to revisit its yearly high at 1.0600.
European equities opened higher as hopes for peace talks boosted investors’ sentiment. The FTSE was up by +0.82% trading at 7575.00, 18 February 2022 resistance, and a break above that area may give room for further upside towards 7700 high which coincides with pre-pandemic levels.
The CAC40 extended gains by +1.41%, breaching an 8-day resistance at 6700. The bullish appetite remains capped by 6800 near-term resistance which coincides with the pre-Russian invasion of Ukraine.
The DAX soared +1.77% to 14731.51 early Tuesday morning and a price action gap was left between 14430 and 14570.23. Price tends to cover these gaps in the near-term
US equities closed higher on Monday despite rising Treasury yields. The S&P500 closed up at +0.71% although gains remain capped by a 2-month high at 4590.40. The Nasdaq rose +1.58% on Monday as bulls took a fresh turn to challenge 15000 near-term resistance. The DJI index gained +0.27%, closing at 34955.89, a few points below 35000.00 psychological resistance.
Gold lost -$10 after hitting a daily high at 1929.27 and extended a drop by -0.33%. The yellow metal remains under selling pressure as risk sentiment improves on hopes of positive diplomatic talks. Gold hit 1901.44 which coincides with March 22 lows and a break below that area may draw sellers towards 1875 near-term support.
