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Market Wrap
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The current forex heatmap shows that the greenback is solid green across the board whereas the Canadian dollar is the weakest relative to its peers. The overall picture is of a risk-off day and that is generally bearish for risk assets like the equities markets.
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As a result of the expanding sanctions against Belarus officials by the European Union, natural gas prices have increased significantly for most of the day but have picked up more dramatically after Belarusian President Alexander Lukashenko threatened to cut off gas transit through the country to the European Union.
Earlier today he mentioned Belarus’ readiness to fully close all transit through the country if new sanctions were imposed. To add to the region’s risk profile, according to one news headline, the US had supposedly warned Europe that Russia could invade Ukraine, but the headline did not go into any further detail. It is clear that just as the USA weaponized the US dollar through sanctions, other nations can weaponize their commodities or possibly use direct force as well. Fortunately, the winter has been mild so far.
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One commodity bucking the trend is gold, which is trading high within an inside-range on the H4 chart. A push through that level of resistance should be enough to get gold back towards $1900/oz and the most recent daily swing high that formed around May 2021.
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Like I alluded to before, the forex market is showing that the path of least resistance is probably to the downside for the equities markets, which have been in a tight range during the US session. 16,050 is acting as a key pivot level but the big number to the downside would be my initial take profit if I were short today.
It’s hard to get short though when the major components of the index are trading above their opening price. The fixed income market is closed today due to the bank holiday, and there is no risk of the yields pushing higher, so that is one supportive aspect to this market. The lack of any scheduled news or central bankers talking are other reasons why this market may go sideways all-day.
