CFD Markets News and Forecasts — 21-02-2022

• Gold extended its rally for two consecutive days and gained 0.60% in the week.
• Heightened tensions in the Ukraine/Russian conflict increased the appetite for the safe-haven metal.
• XAU/USD Technical Outlook: Upward biased, helped by market sentiment. If the conflict escalates, the $2,000 mark is on the cards.

Tensions in the Ukraine/Russia region alongside Russia’s President Vladimir Putin recognizing two separatists Eastern Ukraine regions increased appetite for the safe-haven status of the yellow metal. At the time of writing, Gold is trading at $1,910, and up in the week some 0.60%.

Russia’s recognize Donetsk and Luhansk as independent states

On Monday during the North American session, the two separatist leaders sought recognition by Russia, which they got after a “long” speech of Russian President Vladimir Putin, who put in perspective the history of Ukraine and Russia. That said, Putin urged the Russian Parliament to support the decisions, signing a decree of cooperation and friendship with Donetsk and Luhansk leaders.

Russian President Putin ordered a peacekeeping operation in eastern Ukraine’s two separatist regions while reiterating that the West will impose sanctions anyway, adding that Russia has the right to take retaliatory measures.

Gold’s reaction

The non-yielding metal buyers took advantage of the US holiday observant of President’s day and pushed XAU/USD from $1,896 to $1,914, as war drums in Ukraine do not appear to fade.

West responses to Russian decision

The President of the European Commission said that the recognition of the two separatist territories in Ukraine is a “blatant violation of international law as well as of the Minsk agreements.” She emphasized that the EU will react with sanctions against those involved in this “illegal act.”

Across the pond, US President Joe Biden spoke with Ukraine President Zelensky. Further, US President Biden signed an executive order banning new investment, trade, and financing to the DNR and LNR regions while saying that he would announce additional measures. In the same rhetoric, Poland’s Prime Minister said that Russia’s decision is an act of aggression on Ukraine and said that sanctions should be imposed immediately. Meanwhile, in the UK, Foreign Minister Truss said that the UK would be announcing sanctions on Russia tomorrow in response.

XAU/USD Price Forecast: Technical outlook

Gold is upward biased from a technical perspective. The daily moving averages (DMAs) reside well below XAU/USD spot price, with a bullish slope. That, alongside the break of a nine-month-old downslope resistance trendline, exacerbated the uptrend, helping XAU bulls reclaim the $1900 figure.

XAU/USD first resistance would be $1,916. Breach of the latter will expose January 2021 highs at $1,959, which once cleared could pave the way towards $2,000.

• EUR/USD takes offers to refresh intraday low, prints four-day downtrend.
• Clear break of 200-SMA, ascending trend line from late January favor sellers.
• MACD, RSI adds to the bearish bias targeting short-term support line.
• One-week-old descending trend line adds to the upside filters.

EUR/USD takes offers around 1.1300, printing a fourth consecutive daily downside during the initial Asian session on Tuesday. In doing so, the major currency pair justifies the market’s rush to risk-safety amid recently high fears concerning the Russia-Ukraine tussles.

Read: UK PM Johnson to chair COBRA meeting, Canada, US prepares economic sanctions over Russian actions

That said, the pair’s downside break of the 200-SMA and an upward sloping trend line from January 28 joins bearish MACD signals and descending RSI, not oversold, to keep EUR/USD sellers hopeful.

However, a 13-day-long support line near 1.1290 may test the pair sellers before directing them to the 61.8% Fibonacci retracement (Fibo.) of January-February upside, around 1.1265.

In a case where EUR/USD bears conquer 1.1265 support, 1.1230 and the 1.1200 threshold may act as buffers before directing the quote towards the late January’s bottom surrounding 1.1120.

Alternatively, 200-SMA and the previous support line guards immediate recovery moves of the EUR/USD prices around 1.1345-50.

Also challenging the pair buyers is a descending trend line from January 11, near 1.1375, as well as the 1.1400.

It’s worth noting that the quote’s run-up beyond 1.1400 will challenge the monthly peak of 1.1495.

EUR/USD: Four-hour chart

Trend: Further weakness expected

The West, as well as Japan, prepares harsh measures in response to Russian President Vladimir Putin’s decree "on friendship and cooperation," with Donetsk and Luhansk in Eastern Ukraine.

Firstly, UK PM Boris Johnson is up for a Cabinet Office Briefing Rooms (COBR) meeting at 06:30 GMT (01:30 ET) Tuesday. The agenda mentioned, “To discuss the latest developments in Ukraine and to coordinate the UK response including agreeing a significant package of sanctions to be introduced immediately.”

Following that, the Canadian Foreign Minister crossed wires while mentioning, “Canada strongly condemns Russian recognition of two breakaway regions in Eastern Ukraine, preparing to impose economic sanctions in response.”

Furthermore, the US ordered all remaining State Department personnel to leave Ukraine and US Embassy in Kyiv will be shifted to Poland while French Presidential Office mentioned, “France wants Friday's meeting of Russian and French Foreign Ministers in Paris to be maintained.” 

It’s worth noting that Japan’s Yomiuri mentioned, “Japan to join US in halting semiconductor exports to Russia if it invades Ukraine.”

Additionally, Australia PM Scott Morrison said that they will be in lockstep with allies on sanctions on Russia.

Also read: Western nations moving swiftly to sanction Russia as cold war warms-up

FX reaction

The news weighed on the market’s risk appetite and drags Antipodeans like AUD/USD and NZD/USD, while also fueling gold prices.

Read: NZD/USD sellers attack 0.6700 as Russian headlines widen risk-off mood

• AUD/JPY has slipped below 82.50 as investors prefer Japanese yen on the risk-off episode.
• The labeling of Donetsk and Lugansk as independent by Russia has escalated tensions.
• The comments from RBA’s Christopher Kent will dictate March’s interest rate policy.

The AUD/JPY pair has attracted offers around 82.64 and is likely to settle below 82.50 amid the escalation of geopolitical tensions between Russia and Ukraine. Post recognizing the two regions of Ukraine: Donetsk and Lugansk as independent, Moscow has violated cooperation with NATO. Adding to that, the move by Russia has been considered as a prefix to invade Ukraine.

The move is claiming the credibility of Western warnings that Russia is planning to invade Ukraine and sanctions from Western leaders are getting much air. The escalation in the Russia-Ukraine tussle has hammered the macro/risk barometer. The Japanese yen has been underpinned against the antipodean on risk-off impulse as the rising geopolitical tensions are raising questions over the macro peace and stability.

Meanwhile, British foreign minister Liz Truss has said in a Twitter post that their administration will announce new sanctions on Moscow in response to Putin's decision. Should this occur, the risk-off episodes may stay longer on rising uncertainty and the aussie will continue to perform weaker against the Japanese yen.

Apart from that, the speech from the Reserve Bank of Australia (RBA)’s Christopher Kent will provide some insights on March’s interest rate policy, which is due on Tuesday. While the Tokyo Consumer Price Index (CPI) numbers from the Statistics Bureau of Japan on Friday will be under the radar.

• NZD/USD steps back after refreshing monthly high, pressured of late.
• Russia’s identification of Donetsk and Luhansk as separate states, ordering troops for peacemaking recently weighed on sentiment.
• NZ PM Ardern released details of Step 1 for unlocking, pre-RBNZ optimism initially favored kiwi bulls.
• Full markets, US PMI eyed for intraday directions but risk catalysts are more important.

NZD/USD began the trading week on a firmer footing before the latest pullback dragged it down to 0.6700 during the early hours of Tuesday morning in Asia.

The kiwi pair initially cheered hawkish hopes from the Reserve Bank of New Zealand (RBNZ) and news over the Biden-Putin meeting before Russian President Vladimir Putin’s actions roiled risk appetite. It’s worth noting that an off in the US and Canada curbed the market’s reaction to the anti-risk headlines.

With sustained improvement in New Zealand’s headlines inflation and jobs report, the RBNZ is well-set for a 0.25% rate hike and the chatters over 50 basis points (bps) of a lift aren’t off the table. Though, a faster spread of the covid in the Pacific nation joins geopolitical risks to test the bulls. On Monday, New Zealand (NZ) Prime Minister Jacinda Ardern unveiled “Step 1” of her five-step total unlock from the covid-led restrictions, including the border openings, which in turn offered extra tailwind to the NZD/USD prices before the risk-off mood weighed on the quote.

Reuters came out with the news conveying that Russia has the right to build and establish military bases in eastern Ukraine under a new agreement with separatist leaders. A few hours prior, Russian President Putin recognized Donetsk and Luhansk in Eastern Ukraine as independent states and signed a decree "on friendship and cooperation," which in turn triggered risk-aversion and weighed on the Antipodeans like NZD/USD. Also on the negative side were comments from Putin who turned down optimism over his meeting with US President Joe Biden by signaling no concrete plans for the summit.

Elsewhere, Federal Reserve Board Governor Michelle Bowman followed the tunes of Chicago Fed President Charles Evans and New York Federal Reserve Bank President John Williams while saying, “It is too soon to tell if the Fed should hike 25 or 50bps in March.”

Amid these plays, the US and European stock futures remain downbeat and the bund yields stay firmer.

Moving on, New Zealand’s Credit Card Spending for January, prior 1.2% YoY, will offer intermediate moves ahead of the preliminary US PMIs for February. However, major attention will be given to the full markets’ reaction and geopolitical headlines for clear direction.

Read: US Markit PMIs Preview: Services sector has room for upside surprise, boosting the dollar

Technical analysis

NZD/USD recently failed to cross the 0.6730-35 resistance confluence, including the 50-DMA and a descending trend line from October 28. However, firmer RSI and bullish MACD signals keep the buyers hopeful until the quote drops below a three-week-old support line, near 0.6630.

• WTI rallies more than 2% on Monday, courtesy of Russia’s President Putin, recognizing Donetsk and Luhansk as independent states.
• Oil prices jumped once the headline crossed the wires, almost $2.00.
• WTI Technical Outlook: Upward biased as long as it stays above $90,00.

On Monday, a session that looked to be of losses for Western Texas Intermediate (WTI) US crude oil benchmark resulted in a positive one courtesy of escalation of Russia/Ukraine tussles. At the time of writing, WTI is trading at $93.92 per barrel.

In the last three hours, tensions in Ukraine get to their peak as Russian President Vladimir Putin recognized Donetsk and Luhansk in Ukraine East as independent states. Furthermore, he ordered a peacekeeping operation in eastern Ukraine, two separatist regions.

That said, WTI’s jumped from the lows 92.00 and reached a daily high at $94.06 before retreating to the $93.90s region. Why oil jump? Russia is the third-largest oil and gas producer in the world. An escalation of the conflict pressures oil prices as uncertainty arises about any oil shortages amid the ongoing worldwide re-opening.

The West answers back

Russian President decision spurred responses from Western Europe and NATO members, led by the US. The President of the European Commission said that the recognition of the two separatist territories in Ukraine is a “blatant violation of international law as well as of the Minsk agreements.” She emphasized that the EU will react with sanctions against those involved in this “illegal act.”

Following those reactions, it was reported that US President Joe Biden spoke with Ukraine President Zelensky. At the same time, Poland’s Prime Minister said that Russia’s decision is an act of aggression on Ukraine and said that sanctions should be imposed immediately. Meanwhile, in the UK, Foreign Minister Truss said that the UK would be announcing sanctions on Russia tomorrow in response.

WTI Price Forecast: Technical outlook

From a technical perspective, WTI has an upward bias, as shown by the daily moving averages (DMAs) located above the price. Furthermore, from a market structure perspective, WTI stays trading in the $92.00-$94.00 area, close to the YTD high and the confluence of the 75% Pitchfork’s parallel line around $95.79.

However, on its way to the latter, WTI’s bulls will face some resistance levels on their way north. The first resistance would be $94.00. Breach of the latter would open the door towards February 16 high at $94.98, immediately followed by the YTD high at $95.79. Once cleared, WTI bulls would probe August 2014 highs at $98.55.

• The Kremlin’s recognition of two regions in eastern Ukraine as independent has escalated tensions.
• The DXY is eyeing to settle above 96.00 on risk-off impulse in the market.

USD/JPY is bleeding out on the prospects of an escalation on the geopolitical side in the Russian and Ukraine crisis. USD/JPY is trading at fresh lows near 114.71. Moscow is continuously jeopardizing the situation for Ukraine. The labelling of two regions in eastern Ukraine as independent entities has escalated the tensions. The statement of recognizing Donetsk and Lugansk as independent after signing a decree along with the support from Separatists is a violation of cooperation with the West.

The headlines from the Russia-Ukraine tussle will continue to keep the investors on their toes. However, the investors will also keep an eye over the US Markit PMI Composite reports on Manufacturing and Services and Consumer Confidence numbers, which are due on Tuesday.

The USD/JPY pair had otherwise witnessed some stellar bids around 114.75 after the Federal Reserve (Fed)’s Bard Governor Michelle Bowman keeps the windows open for a potential 50 basis points (bps) interest rate hike in March. The comments have cleared that an aggressive tightening policy of a 50 bps hike is under the choice list of the Fed to combat the rising inflation.

For deciding the extent of an interest rate hike, the Fed has to pass one more inflation report and employment figures, which may be very crucial before reaching an outcome. Adding to that, the Fed’s Michelle Bowman states that the Fed's balance sheet is highly required to scale down to an appropriate and manageable level that may help control the ramping-up inflation.

Meanwhile, the US dollar index (DXY) is eyeing to settle above 96.00 on geopolitical jitters. The market participants have also channelized their funds into DXY on a hawkish stance from the Fed’s Michelle Bowman, which has underpinned the greenback.

Russian President Vladimir Putin delivered a threatening speech in the New York session which has weighed on risk and encouraged a swift response from the West with harsh new sanctions being implemented. 

Putin has signed a separatist recognition decree over eastern Ukraine regions and the decrees on recognizing the Donetsk and Luhansk People’s Republics also ordered the Russian armed forces to go into separatist territory on peacekeeping missions. 

This has sparked retaliation from the US, UK, EU and UN and the Twitter feeds are quoting some key figures on the international stage in this regard:

• UN chief Guterres considers Russia's eastern Ukraine recognition a 'violation of territorial integrity, sovereignty of Ukraine, inconsistent with UN charter.
• UK govt says sanctions expected to go further if invasion happens, so they won’t go as far as full package prepared, The Guardian.
• UK govt confirms it will be announcing Russia sanctions tomorrow in response to Putin's declaration, The Guardian.
• White House official says Biden has started the call with France's Macron and Germany's Scholz.
• German government spokesman: Chancellor Scholz agreed with macron and Biden that Putin's decision won't go unanswered.

Update

Reuters recently came out with the news conveying that Russia has right to build and establish military bases in eastern ukraine under new agreement with separatist leaders.

• AUD/USD resistance is identified near 0.72 the figure. 
• A Fibo extension to the downside in measuring for the 50% mean revision leaves 0.7181 as a key target.

The price is attempting to break lower but there is some meanwhile support coming in at the lows. A correction to prior lows could be on the cards in a 50% mean reversion.

AUD/USD H1 chart

This could be expected to act as resistance and result in further selling for fresh hourly lows into the 0.7180's. 

AUD/USD M15 chart

From a 15-min perspective, the resistance structure is made clearer with the above chart identifying the wicks of prior lows and highs near 0.72 the figure.

This would be expected to act as resistance on a retest as the price corrects from the hourly lows. A Fibo extension to the downside in measuring for the 50% mean revision leaves 0.7181 as a key target to the downside for a continuation. 

• EUR/JPY slumped under 130.00 for the first time since February 3 on Monday as Russia escalated tensions with Ukraine & NATO.
• Russia announced its decision to recognise the independence of breakaway regions of eastern Ukraine and NATO nations are preparing sanctions.
• Geopolitical hostilities and the rising risk of a broader Ukraine/Russia conflict suggests EUR/JPY’s risks are tilted lower.

EUR/JPY slumped below support at the key psychological 130.00 area for the first time since February 3 on Monday, as the euro suffered from further escalation in the Russia/Ukraine crisis. The pair is now trading in the 129.75 area, down about 0.3% on the day and a more than 0.8% turnaround from earlier session highs nearer to 131.00. Russian President Vladimir Putin confirmed that Russia would be recognising the independence of the Donetsk and Luhansk People’s Republics in Donbas, two pro-Russia breakaway regions of Eastern Ukraine over which a bitter civil war was fought back in 2014/15.

Market participants interpreted Russia’s decision to recognise the breakaway regions as independent substantially increasing the risk of a broader military confrontation between the Russian and Ukrainian armies. The fear is that Russia will step in to back the separatist region as hostilities with Ukraine’s army ratchet up. Various EU and NATO nations are now understood to be preparing a preliminary round of sanctions against Russia, with Western nations claiming Russia’s declaration goes against international law. Given its dependence on Russian energy imports, the Eurozone economy is seen as vulnerable to any Russian counter-sanctions.

For this reason, over the course of the coming days and especially now since key support at the 130.00 level has been broken, EUR/JPY’s risks seem tilted to the downside. Traders will once again be looking at a long-term uptrend linking the November 2020, December 2021 and January 2022 lows which will offer support just under 129.00. In the meantime, the most immediate area of support is in the 129.50 area. A lack of notable tier one data releases out of the Eurozone or Japan should mean that geopolitics and broader risk appetite remains the major driver of the pair.

• USD/RUB holds in the bullish territory as the Russian/Ukraine crisis unfolds. 
• Volatility picks up in historical events for Russia and Ukraine. 

The Russian ruble is volatile on Monday as the headlines roll in thick and fast regarding the developments at the Kremlin. Russia's President Vladimir Putin has announced his intention to sign a separatist recognition decree over eastern Ukraine regions.

The following illustrates the market volatility on the 1-hour chart and a timeline of how the price has reacted to various stages of the crisis unfolding on a daily basis since November 2021. This was when Satellite imagery showed a new build-up of Russian troops on the border with Ukraine.

USD/RUB H1 chart

USD/RUB daily chart

What you need to take care of on Tuesday, February 22:

Risk aversion took over financial markets at the beginning of the week amid escalating geopolitical tensions in Eastern Europe. The greenback managed to advance against its high-yielding rivals but lost ground against safe-haven ones.

 Mid US-afternoon, Russian President Vladimir Putin recognized Donetsk and Luhansk in Eastern Ukraine as independent states signed a decree "on friendship and cooperation." The world sees this decision as the first step towards an invasion, which also invalidates talks with Western nations.

Earlier in the day, EU's Josep Borrel,  High Representative of the Union for Foreign Affairs and Security Policy, said that the EU is ready to 'strongly r'act' if Russia recognizes Donbass independence, which Putin did by the end of the American afternoon. Borrel tweeted:"The recognition of the two separatist territories in #Ukraine is a blatant violation of international law, the territorial integrity of Ukraine and the #Minsk agreements"

Markit published the preliminary estimates of its February PMIs for the EU. The services sector posted a nice comeback with the German index up to 56.6 and that of the EU printing at 55.8. The manufacturing PMI in both economies came in below expected, but well above the 50 level that divides contraction from economic expansion

The EUR/USD pair is approaching 1.1300 while GBP/USD battles around 1.3600. Commodity-linked currencies are down vs the greenback, despite gold is trading above $1,903 a troy ounce amid demand for safety, while crude oil prices surged on disruption fears, with WTI now changing hands at $92.75 a barrel.

US markets were closed due to President Day, but stocks futures edged firmly lower on Russia/Ukraine news. European and Asian futures are also down, hinting at an upcoming risk-off Tuesday.

Shiba Inu firms up support before SHIBA tests a breakout above $0.000030

• On Monday, the EUR/GBP falls 0.13% during the day.
• Russian President Vladimir Putin’s recognition of Donetsk and Luhansk ad independent states worsened the market mood.
• EUR/GBP Technical Outlook: Downward biased, as sellers eye the YTD low at 0.8264.

The shared currency continued falling for the fourth consecutive day vs. the British pound during the North American session on Monday. At the time of writing, the EUR/GBP is trading at 0.8320, down 0.08%.

The market is in a risk-off mood, courtesy of increasing tensions in the Ukraine/Russia conflict. As of late, Russian President Vladimir Putin recognized the independence of the Donetsk and Luhansk in Ukraine’s East as independent states.

That said, global equity futures fall, led by Asian and European equity futures. At the same time, Gold is above the $1900 mark, while crude oil futures rise, with Brent and WTI. Each up close to 3%, sitting at $94.10 and $92.80.

In the overnight session for North American traders, the EUR/GBP reached a daily high at 0.8351. However, better than expected UK PMI’s alongside a dampened market mood weighed on the euro, pushing the pair towards lows 0.8300s.

EUR/GBP Price Forecast: Technical outlook

The EUR/GBP is downward biased from a technical perspective, as confirmed by the daily moving averages (DMAs) residing well above the exchange rate. On Monday, the EUR/GBP broke the bottom-trendline of a descending channel and eyes to break the January 28 daily low at 0.8305. The Relative Strength Index (RSI), an oscillator at 40 is aiming down, signals that EUR/GBP sellers have enough room to spare, to push the pair lower before reaching oversold conditions.

Therefore, the EUR/GBP first support would be January 28 daily low at 0.8305. Breach of the latter would expose 0.8300, followed by February 3 daily low at 0.8284, and then the 2017 April’s 17 daily high at 0.8117.

• Prior to the close of US equity index futures trade, S&P 500 futures fell back under the 4300 level.
• Russia will recognise the independence of breakaway regions in Eastern Ukraine, ramping up tensions and weighing on sentiment.
• Hawkish Fed commentary may have added to the downside as US Core PCE inflation data looms later in the week.

S&P 500 futures fell sharply on Monday as geopolitical tensions simmered amid expectations that Russia would recognise the independence of two breakaway provinces in Eastern Ukraine, setting the stage for further military escalation in the region. After a long speech where he explained the history of Ukraine and was strongly critical of the country, Russian President Vladimir Putin made the recognition of the breakaway regions official. US equity index futures trade has been halted since 1800GMT and won’t yet restart for a few hours when Asia markets open, but now before S&P 500 futures dropped below the 4300 level for the first time since late January. When futures trade reopens, traders will undoubtedly be eyeing a test of January lows nearer to 4200.

Another factor that likely weighed on US equity futures on Monday was hawkish remarks from Fed policymaker Michelle Bowman. Bowman said it was too early to know if the US economy needs a 50bps rate hike in March, thus keeping the door open to the prospect of a larger rate move. As market commentators have pointed out, just because geopolitics has come to the forefront as the major market-moving theme in recent weeks doesn’t mean that investors have forgotten about Fed tightening fears. In the context of hawkish commentary on Monday, this week’s US data, especially Thursday’s January Core PCE inflation.

An upside surprise, which would come on the heels of upside surprises for both January’s Consumer and Producer Price Inflation readings, could further build the case for a 50bps move, though most analysts see the February CPI data as key. Regardless, hot data likely won’t go down well in the US equity space and, if coupled with further escalation of the Ukraine crisis, would imply a real risk of breaking out to fresh annual lows in the 4200 area. Note that Monday’s S&P 500 futures close left the index more than 10% below the record highs above 4800 hit at the start of the year, confirming a correction. Investors will worry whether this correction might now turn into a bear market (a 20% drop).

• USD/CAD is ticking higher despite strong oil prices. 
• Ris-off markets are hurting the commodity complex currencies as Putin addresses the nation. 

The Canadian dollar weakened against its US counterpart on Friday and remains pressured at the start of the week despite the price of oil spiking on Monday. Risk-off is the theme as investors, mindful of Russia's military build-up around Ukraine, turn to the latest developments and announcements from the Kremlin.

Watch live: Putin speaks over Ukraine in contempt

At the time of writing, Russia's president, Vladimir Putin, is addressing the nation and making his opinions about Ukraine in contempt. This is hurting risk-FX and the CAD included as investors seek out safe-havens, such as gold which is breaking to the day's highs currently.

Meanwhile, during his long-winded speech, Putin is expected to say that he has signed a separatist recognition decree over eastern Ukraine regions which will be another step closer to the prospects of a European war and will likely hurt risk associated assets classes in financial markets. 

The price of oil, however, is getting a boost as traders anticipate sanctions on Russian exports. The market has room to run higher considering investors opted to liquidate their length in WTI crude oil recently.  Conflicting reports between escalation and de-escalation have made for a volatile landscape for the energy sector.

''Until there is some clarity in either direction, the risk premium is likely to remain baked into market pricing,'' analysts at TD Securities argued. ''With non-geopolitical supply factors starting to shift toward looser markets, energy prices are particularly vulnerable to a de-escalation in Russian-Ukrainian tensions in the immediate term.''

As for domestics, Canadian Retail Sales rose 2.4% in January from December, a flash estimate from Statistics Canada showed, supporting expectations for the Bank of Canada to begin hiking interest rates at the March 2 policy announcement. 

• NZD/USD has fallen back to the 0.6700 area in recent trade as the US dollar enjoy a modest intra-day recovery.
• The buck has been underpinned in recent trade as geopolitical tensions regarding the Ukraine crisis rise.
• Ahead, aside from geopolitics, the main event of the week will be the RBNZ rate decision.

NZD/USD has fallen back to 0.6700 in recent trade after hitting fresh monthly highs in the 0.6730s earlier in the session, as the US dollar enjoys a modest intra-day recovery amid heightened geopolitical tensions. Russian President Vladimir Putin has been delivering a long, inflammatory speech where he practically criticised everything about the existence of the state of Ukraine and will soon announce a decision to recognise the independence of two breakaway Ukrainian regions. Investors have been buying safe-haven dollars in recent trade and selling other G10 currencies, including the kiwi, out of fear that this recognition will lead to an escalation of tensions between the militaries of Ukraine and Russia.

At current levels, NZD/USD is still trading with gains of about 01% on the day, with traders seemingly reluctant to short the kiwi/unload long positions ahead of this Wednesday’s RBNZ meeting. Analysts are split over whether the bank will hike by 25bps or 50bps and that hawkish risk seems to be underpinning NZD/USD in 0.6700 area. Otherwise, Fed speak and US data this week including flash February PMIs, the second estimate of Q4 GDP growth and January Core PCE data will be worth watching, but will likely play fiddle to the RBNZ meeting and geopolitical developments.

Russian President Vladimir Putin on Monday called Eastern Ukraine "ancient Russian lands" and said that the region is an integral part of Russian history. Putin said that the situation in Eastern Ukraine is "critical" and talked about how modern Ukraine was created by communist Russia under Boshevik leader Vladimir Lenin. 

• Silver retreats from weekly tops around $24.00 as the Russian President recognize Donetsk and Luhansk as independent states.
• The white-metal falls despite a weaker US dollar across the board.
• XAG/USD Technical Outlook: Faces strong resistance around $24.00-$24.25 area.

Silver (XAG/USD) retreats from $24.00 despite growing concerns in geopolitical jitters in Eastern Europe. At the time of writing, XAG/USD is trading at $23.90.

Russia’s signed a decree recognizing Donetsk and Luhansk as independent states

War concerns between Russia and Ukraine increase. In the last couple of hours, amid a US bank holiday, the conflict in Eastern Europe grabs all the attention. Leaders from two Eastern Ukraine separatist regions urged Russian President Vladimir Putin, who, at 18:00 GMT, signed a decree recognizing them as independent states.

That said, the XAG/USD barely blinked at the reaction of the headline crossing the wires, steady around the $23.80 region.

During the overnight session for North American traders, the white metal failed to gain acceptance above the $24.00 mark, protected above by a ten-month-old downslope trendline and the 200-day moving average (DMA) at $24.25. It is worth noting that based on the price action, the $0,15 mean reversion move could be attributed to profit-taking, as the non-yielding metal, as shown by the 1-hour chart, stalled at the 50-hour moving average (HMA) around $23.86.

XAG/USD Price Forecast: Technical outlook

XAG/USD is neutral biased, depicted by the daily chart. The shorter time-frame daily moving averages (DMAs) reside below the spot price, indicating that XAG/USD aims upward. However, the presence of a ten-month-old trendline around the $24.00 mark, alongside the 200-DMA at $24.25, would be crucial resistance levels to overcome for XAG bulls if they would like to aim higher.

At press time, XAG/USD first resistance would be $24.00. Once cleared, it would expose the 200-DMA at $24.25. Breach of the latter would pave the way towards last year’s November 16 daily high at $25.40.

• EUR/USD dipped in recent trade as confirmation of Putin’s recognition of breakaway Ukrainian regions triggered fears of further escalation.
• The pair dipped back to the 1.1320 area to then find support at last Friday’s lows to trade flat.

EUR/USD dipped sharply in recent trade, falling from around the 1.1340 area to under 1.1320 in a matter of minutes after the Kremlin confirmed that Russian President Vladimir Putin would sign a decree recognising the independence of separatist Ukrainian regions. Traders sold their euro and bought safe-haven US dollar amid concerns that official Russian recognition of the statehood of the Donetsk and Luhansk People’s Republics makes a military confrontation between Ukraine and Russia much more likely.

Russia and the breakaway regions located in Ukraine’s East may well now sign some sort of defense partnership. Given that the breakaway regions have been escalating the conflict with Ukraine’s military in recent days, that could see Russian forces dragged into the fray to directly engage the Ukrainian military in combat. Russian military action against Ukraine would almost certainly see NATO countries impose tough economic sanctions on Moscow, leaving the Russian-energy import-dependent Eurozone vulnerable to Russian countermeasures, hence the downside in the euro.

Hawkish Fed speak on Monday from FOMC member Michelle Bowman, who said it was too early to know if the US economy needs a 50bps rate hike in March, further adds to the case for a lower EUR/USD on Monday. At current levels around 1.1320, the pair has not eroded all of its earlier gains and is trading flat on the day, though has found some support in the form of last Friday’s lows in the 1.1310s. Looking ahead, geopolitics will remain in the driving seat and with things likely to escalate further, that suggests downside risks for EUR/USD. A break below last Friday’s lows would free up a run towards last week’s lows in the 1.1280 area.

• AUD/USD bears moving in on risks associated with the Kremlin.
• Aussie wages are a focus for the week ahead. 

AUD/USD is under pressure as the Kremlin announces that the Russian president, Vladimir Putin plans to sign Ukraine separatist recognition. At the time of writing, AUD/USD is sliding a handful of pips below the 0.72 figure with the swing lows of 0.7192 eyed ahead of 0.7165. 

Putin is due to address the nation at any moment which is leaving markets on edge. He is expected to say that he has signed a separatist recognition decree over eastern Ukraine regions which will be another step closer to the prospects of a European war and hurt risk associated asset classes in financial markets. 

Meanwhile, NATO leaders and the West will be expected to retaliate with sanctions and such announcements will follow shortly. EU's Josep Borrell said, ''if there is a recognition I will put the sanctions on the table for ministers to decide.''

The US is also prepared to impose swift and severe consequences if Russia invades Ukraine, with the White House noting and stating that Russia appears to continue preparations for a full-scale assault on Ukraine very soon. Biden's administration has already prepared an initial package of sanctions that include barring US financial institutions from processing transactions for major Russian banks. A G7 meeting is also due to take place this Thursday, a White House spokesman said.

Meanwhile, in Australia, the main domestic event will be wages data for the December quarter. Forecasts expect a rise of 0.7% to take the annual pace up to 2.4%, from 2.2%. ''That would be the fastest annual gain since late 2014, though still short of the 3%-plus the Reserve Bank of Australia (RBA) wants to see,'' Reuters reported.

''The RBA has said it is plausible a rate rise could come later this year, while markets are fully priced for a move to 0.25% by June.'' Analysts at TD securities argued that ''if wages surprise above 2.5% YoY, AU rates is likely to underperform as the markets test the RBA's dovish stance.''

AUD/USD technical analysis

The price is on the verge of a significant test of the trendline support on the hourly chart. 0.7192 guards the prospects of a run to the prior swing lows of 0.7165.

Russian President Vladimir Putin is to sign a decree recognise the breakaway regions of Eastern Ukraine, Donetsk and Luhansk, as independent nations, the Kremlin announced on Monday. Putin had informed the President of France and Chancellor of Germany of his decision shortly before the Kremlin made it official and they were reportedly "dismayed". France has subsequently called for a UN security council meeting on the Ukraine crisis, reported French press. 

Market Reaction

Markets saw a risk-off reaction to confirmation that Russia will recognise the breakaway regions of Ukraine as independent as this is deemed as a big escalation that makes a military confrontation between Ukraine and Russia (i.e. a Russian invasion) significantly more likely. In FX markets, safe-haven currencies including USD and others have been gaining in recent trade while risk-sensitive currencies have been taking a hit. US equity futures continue to press to fresh lows of the day, with S&P 500 futures now down about 1.3% and underneath the 4300 level. Oil prices have been on the front foot with WTI rallying into the mid-$93.00s from as low as the mid-$92.00s just a few minutes ago. 

• Gold is subdued as markets await developments from the Kremlin.
• Russia's President Putin is to address the nation at 1800 GMT which could be market impactful. 

Gold has been trapped in a sideways consolidation in Monday's range and between the toing and froing of headlines centred around the Russian/Ukraine drama. It is the zero hour for diplomacy and the Kremlin has regretfully said there were no concrete plans for a summit over Ukraine between the Russian and US presidents. The safe-havens, such as gold and the US dollar, are benefitting, thus trapping the yellow metal in a risk-off boundary. 

At the time of writing, XAU/USD is flat at $1,895.92 and has travelled between  $1,887.66 and $1,908.32 on the day so far. Reports that Russian president Vladimir Putin and US president Joe Biden had agreed in principle to a summit had sparked up a risk-on vibe in the opening hours of the week, weighing on precious metals.

US president Joe Biden will participate in the G7 meeting this Thursday, a White House spokesman said. The official also said, however, that the US is prepared to impose swift and severe consequences if Russia invades, adding that Russia appears to continue preparations for a full-scale assault on Ukraine very soon.

Putin to address the nation

The focus for the immediate future will be on Putin at the top of the hour where he is scheduled to address the nation. Markets will be on the edge of their seats to understand whether Putin has decided today whether to recognise the independence of two breakaway regions in eastern Ukraine.

The BBC wrote that ''the Donetsk and Luhansk regions have been contested by Ukraine and Russia-backed rebels for years, with regular violence despite a ceasefire agreement.

Leaders of both regions asked Russia to recognise their independence on Monday.

But Western powers fear such a move could be used as a pretext for Russia to invade its neighbour.

Since 2019, Russia has issued large numbers of passports to people living in the two regions.

Analysts say that if the two regions were recognised as independent, Russia might send troops into Ukraine's east under the guise of protecting its citizens.''

Market implications

Should there be signs of the infiltration of troops into the region, such an escalation will be a big blow for markets and gold would be expected to benefit on the knee-jerk s trend-followers and speculators reengage. 

Gold, technical analysis

The price is trapped in 4-hour range traders are waiting for the breakout, one way or the other. 

• The British pound holds its daily gains following positive UK economic data amid Eastern Europe escalation.
• The greenback remains trading softer despite an appetite for safe-haven peers.
• GBP/USD Technical Outlook: Neutral-upwards despite that the 200-DMA resides above the exchange rate.

The British pound retreats from daily highs amid increasing tensions in Eastern Europe. At the time of writing, the GBP/USD is trading at 1.3614, up some 0.13%. As abovementioned, geopolitical jitters caused a fall in the GBP/USD as of late amid a US bank holiday.

Risk-aversion looms the financial markets. Europea bourses trade in the red, while US equity futures drop between 0.73% and 1.66%. Further, the greenback keeps weakening in the day, with the US Dollar Index down 0.14%, sitting at 95.91.

UK’s Services PMI smashed expectations

The UK reported better than estimated Markit PMIs for February in the European session, led by the Services Flash rising to 60.8, higher than the 55.5 foreseen. Further, the Manufacturing Flash rose to 57.3, a tenth up than estimations, while the Composite rose to 60.2, higher than the 55.

The GBP/USD reacted positively to the news and rose to 1.3630. However, a shift in market mood put a lid on the move, even retreating most of the gains, as Russian/Ukraine headlines continue to grab investors’ attention.

Later in the day, Federal Reserve Governor Michelle Bowman, a voter in 2022, said that she favors a rate hike in the March meeting, though she is assessing its size. It is worth noting that her view on rates and balance sheet reduction would depend on the economy while emphasizing that the challenge for the Fed would be to bring inflation down without harming the economic expansion.

On Tuesday, the economic docket in the UK will feature Bank of England’s (BoE) Ramsden, followed by the release of CBI Industrial Trend Orders for February. Across the pond, House Prices data for December, Markit PMIs, and Consumer Confidence for February would be followed closely by GBP/USD traders.

GBP/USD Price Forecast: Technical outlook

From a technical perspective, the GBP/USD is neutral-upward biased, despite the 200-day moving average (DMA) located above the exchange rate, at 1.3683. That alongside a nine-month-old downslope trendline would be crucial barriers to overcome in the event of the pair achieving higher prices

The GBP/USD first resistance would be the trendline abovementioned around the 1.3635-50 area. Breach of the latter would expose the 200-DMA at 1.3683. Once it is cleared, the next support would be the 1.3700 mark.

On Wednesday, the Reserve Bank of New Zealand (RBNZ) will announce its decision on monetary policy. A 25 bps rate hike is expected. Analysts at Wells Fargo see a 25 bps rate hike as opposed to a 50 bps hike considering the governor of the bank spoke about a cautious approach to tightening. 

Key Quotes: 

“We, along with the consensus, expect the central bank to raise rates another 25 bps to 1.00%. After the economy slumped in Q3 due to a COVID-related lockdown, incoming data show a solid rebound from Q4 last year, as reflected in employment and retail spending data. Meanwhile, inflation pressures have also intensified, as the Q4 headline CPI firmed to 5.9% year-over-year with an acceleration also in underlying inflation as well as non-tradables inflation.”

“Against this backdrop, we expect the RBNZ to continue its shift toward a less accommodative monetary policy stance at next week's policy meeting. At the same time, we favor a more measured 25 bps rate hike as opposed to a larger 50 bps increase, particularly after the central bank governor said late last year the RBNZ would take a “cautious” approach to tightening by moving in 25 bps increments “for now.”

Data released on Monday showed the Producer Prince Index in Germany jumped to 25% (annual). Analysts at Commerzbank point out prices of energy and intermediate products continued to rise and is being felt in the prices of consumer and capital goods. The numbers indicate that the rise in consumer prices is not expected to level off for the time being according to them. 

Key Quotes: 

“German producer prices keep rising strongly. Compared with the previous month, they increased by a seasonally adjusted 1.9% in January. Although this is not as strong as in December (+4.9%), this is primarily due to the fact that energy prices, which had literally shot up in December, were no longer quite as strong.”

“The January figures thus show that price pressure at the upstream levels remains strong and, if anything, has recently increased once again. This suggests that consumer prices will also continue to rise strongly in the months ahead. We expect inflation in Germany to hover around 5% into the fall. The inflation rate for the euro zone is unlikely to be much lower. This keeps up the pressure on the ECB to normalize its ultra-expansive monetary policy at least somewhat.”

An agreement between the US and Iran on a return to compliance with the 2015 nuclear deal could be reached within the next couple of days reported the WSJ on Monday citing officials involved in the talks, with US President Joe Biden having set restoring the agreement as a top foreign policy goal. The report added that negotiators are still wrangling over significant final demand from Tehran, including the scope of sanctions relief. 

Market Reaction

Oil prices have not been affected in recent trade, report largely in fitting with commentary from other sources in recent days. 

• Geopolitical tensions favor the safe-haven appeal of the Swiss franc vs. the greenback.
• The USD/CHF broke the 200-DMA, accelerating the downtrend.
• USD/CHF Technical Outlook: Neutral-downward biased and could shift downwards if the USD/CHF reclaims the 0.9107 mark.

Increasing tensions in Eastern Europe triggered a flight to safe-haven peers, in the case of the USD/CHF, a headwind for the USD, boosting the Swiss franc. Furthermore, the break of the 200-DMA accelerated a move towards 0.9100. At the time of writing, the USD/CHF is trading at 0.9154.

The market mood is risk-off by the no-resolution of the Ukraine/Russia conflict. European bourses remain to trade in the red, reflecting investors risk-aversion. The cash US equity indices are closed during the US President’s day and would resume trading on February 22. However, US indices in the futures market are trading with losses.

During the overnight session, the USD/CHF retreated from daily highs above the 0.9200 figure before the European session. The downtrend resumed once European traders got to their desks, breaking the February 18 daily low at 0.9191.

USD/CHF Price Forecast: Technical outlook

On Monday, the USD/CHF broke the 200-day moving average (DMA), which also confluences with the February 3 daily low at 0.9177, accelerating the downtrend.

Therefore, the USD/CHF is neutral-downward biased and would be downwards once it breaks the next support level at January 21 daily low at 0.9107. Breach of the latter would expose the January 13 daily low at 0.9192, the bottom of the trading range, which once cleared would expose April’s 2021 lows at 0.9018.

• Yen rises amid risk aversion on the back of geopolitical tensions.
• USD/JPY with a bearish bias while under 115.10.

The USD/JPY is holding onto daily losses and trading under 115.00 on Monday’s American session. The pair bottomed at 114.79, slightly above last week low. The dollars ix mixed while the yen is mostly higher across the board.

Yen benefits as Putin’s comments hit markets

The Japanese yen is among the top performers on Monday, rising at a modest pace, supported by risk aversion. Equity prices are falling in Europe with the CAC 40 falling by 1.48% and the DAX 1.36%. US markets are closed due to President’s Day. Dow Jones futures are falling 0.68%. The DXY is falling 0.15%, off lows. It remains in the 96.15/95.70 range.

Market sentiment deteriorated amid rising tensions regarding the Ukrainian border.  Russian President Vladimir Putin mentioned that Russia should recognize the independence of separatist regions of Ukraine if no process is made.

USD/JPY testing key short-term support

The USD/JPY is moving with a bearish bias in the very short term, testing the 114.75/80 support area. A break lower should clear the way to more losses, targeting 114.45 initially.

A recovery above the 20-SMA (Simple moving average) in the four-hour chart, currently at 115.10, would change the bias from negative to neutral.

Technical levels

Russian President Vladimir Putin said on Monday that he would make the decision as to whether or not to recognise the breakaway regions of Eastern Ukraine as independent nations on Monday, after being urged by most of the members of his cabinet, as well as leaders in Russia's State Duma, to do so. Putin stated that Russia is not "talking about" adding the two break-away regions of Ukraine into Russia's territory. Negotiations on the Donbass region are in a deadlock, he said, adding that if no progress is made in resolving crisis, then Russia should recognise the independence of the regions.

Market Reaction

The broad market mode remains one of nerviousness. Seperate reports suggested that Putin has already made up his mind to recognise the independence of the breakaway regions inside Ukraine. Such a recognition could turn up the heat in the region significantly; pro-Russia separatist forces have already been staging false flag attacks and blaming them on Ukraine's military in recent days and shelling across the ceasefire line has been escalating in recent days.

The pro-Russia separatists have also been increasing the inflammatory rhetoric and misinformation in recent days; claiming they have uncovered plans for a Ukrainian assault to take back control of the region and claiming Ukraine is planning a "genocide" on Russian speakers in the area. A Russian recognition of the independence of the breakaway regions in Donbas paves the way for Russia to provide direct military support for the region's forces against "Ukrainian aggression". I.e. another major pretext for Russia to attack Ukraine.  

UK Defense Minister Ben Wallace on Monday warned that over the last 48 hours, the UK has continued to observe increasing troop numbers, as well as movement to "launch" areas near Ukraine's border. Wallace added that there has been a proliferation of false flag events and, as a result, the UK continues to have a strong cause for concern that Russian President Vladimir Putin might still be committed to an invasion of Ukraine. Wallace urged Putin to rule out an invasion of Ukraine. 

• WTI was flat near $92.00 on Monday as traders weighed escalating Russia/Ukraine/NATO tensions against a possible US/Iran nuclear deal.
• Investors continue to fret that Russia could be about to invade Ukraine as tensions in Donbass continue to rise.
• The Saudi Aramco and Vitol CEOs were bullish on oil demand in recent commentary, helping keep WTI supported above $90.00.

Crude oil prices stabilised on Monday, with front-month WTI futures last trading flat in the $92.00 per barrel area, as traders weigh ongoing escalation in the Russia/Ukraine crisis against the rising likelihood of a new US/Iran nuclear pact. According to the newsflow coming out of Russia, President Vladimir Putin appears to be on the verge of, or at least being strongly pushed towards, recognising the two breakaway regions of Eastern Ukraine as independent nations. Fighting across the ceasefire line that separates the so-called Donetsk and Luhansk People’s Republics with Ukraine has continued to escalate in recent days, unnerving investors and supporting oil prices.

As NATO officials continue to warn that Russia is preparing to invade Ukraine, investors are fretting that Russia and its allied separatists in the East of Ukraine are looking to create a false pretext for military action. There is a high degree of uncertainty regarding the sanctions Western nations would place on Russia in the event of an invasion, but most agree there would be disruption to global oil supply. That explains why WTI has been able to hold so well above the $90.00 in recent days, despite the prospect of a US/Iran nuclear deal bringing over 1M barrels per day in exports back onto global markets.

In terms of the latest on the US/Iran front; an Iranian foreign ministry spokesperson said “significant progress” had been made, following comments from a senior EU official last Friday that a deal was “very, very close”. “A deal would obviously be a bearish development for the market if Iran is able to ramp up exports fairly quickly,” analysts at ING remarked. “However, just how bearish would depend on where we are with Russia-Ukraine by that time, the bank concluded. “If a Russian invasion takes place as the U.S. and UK have warned in recent days,” analysts at Commonwealth Bank said, “Brent futures could spike above $100/bbl, even if an Iranian deal is reached.”.

In that sense, it isn’t too surprising that dips towards $90.00 continue to be bought, especially given the bullish crude oil demand backdrop. The world’s largest oil company Saudi Aramco over the weekend said that that demand is rising, especially in Asia. The company’s boss remarked that “with the global recovery we’re seeing today, there is more demand for products and we see that from different enclaves, especially in Asia”. Meanwhile, the CEO of major oil producer Vitol Group was also bullish, telling Bloomberg TV on Monday that “demand is going to surge in the second half” of the year and likely exceed 100M BPD if travel continues to return to normal. The CEO warned that “eventually we’re going to run out of spare capacity.”

• The USD/RUB has gained 6.44% in the last three days.
• Separatist leaders sought recognition of Russian President Putin, which could undermine talks between Russian/US officials.
• USD/RUB Technical Outlook: Escalation of the conflict, could spur a jump towards 80.41, followed by 80.95.

The USD/RUB advances 1.54% during the North American session, trading at 78.81 at press time. Financial market mood seesaws courtesy of high tension in the Russia/Ukraine conflict, while investors left economic information and fundamentals side until the conflict resolution. The former caused a jump in crude oil prices, with Brent oil sitting at $92.03 per barrel, while Western Texas Intermediate (WTI) is trading at $90.78 per barrel.

Russia/Ukraine conflict updates

The latest developments in the Russia/Ukraine conflict keep uncertainty surrounding the markets. The Donetsk and Luhansk region leaders asked Russian President Vladimir Putin to recognize them as independent Republics when a Sputnik correspondent reported artillery fire “heard” at Donetsk airport.

In the meantime, Russia’s President Vladimir Putin said that Ukraine does not plan to fulfill the Minsk Agreement. As a result, Putin said that Russia ought to consider recognizing the independence of those two regions in Eastern Ukraine.

Analysts suggest that any recognition of the latter might also undermine the prospects of peace talks between Russian and US officials, to be held on February 24 in Geneva, as Russian Foreign Minister Lavrov commented that he plans to meet US Secretary of State Blinken

It is worth noting that Russian Banks imported USD 5 Billion in foreign currency in December, as it pre-empts a possible spike in demand for non-Rub banknotes.

Therefore, if a resolution fails to be achieved, that would be a headwind for the RUB. Also, sanctions imposed on Russia may spark a significant depreciation of the RUB vs. the USD, pushing the USD/RUB exchange rate towards January 2016 highs at 85.98.

USD/RUB Price Forecast: Technical outlook

The USD/RUB has rallied 6.44% in the last three days, threatening to reach the YTD high sitting at 80.41. Also, the weekly moving averages (WMAs) sit well below the exchange rate, in a bullish order, with the shorter time-frames above the longer time ones.

The USD/RUB first resistance would be the YTD high at 80.41. Breach of the latter would expose November’s 2020 highs around 80.95, and then March 2020 highs at 82.86.

• USD/TRY picks up pace and trades close to 13.70.
• Investors’ attention remains on the geopolitical scenario.
• Turkey’s Central Government Debt Stock rose to TL 2,844.4B.

The Turkish lira adds to Friday’s losses and lifts USD/TRY to the upper end of the recent range near 13.70 on Monday.

USD/TRY looks to risk trends

USD/TRY flirts with the area of recent highs near 13.70 despite the renewed offered stance in the greenback and amidst the broad-based upbeat mood surrounding the risk-associated universe.

In fact, investors remain vigilant on the developments from the Russia-Ukraine-US standoff ahead of the Blinken-Lavrov meeting on February 24 in Geneva, while there is still a ray of hope around a diplomatic solution of the conflict.

In the domestic calendar, Foreign Arrivals rose 151.40% in January vs. the same month of 2021, while the Central Government Debt Stock rose to TL 2,844.4B during last month.

What to look for around TRY

The pair keeps its multi-week consolidative theme well in place around the mid-13.00s for the time being. The lira, in the meantime, remains surprisingly stable so far this year, particularly after the government announced a lira time-deposit protected scheme in late December and after the CBRT left the policy rate unchanged in the last couple of meetings. However, the lira is expected to remain under scrutiny amidst rampant inflation, negative real interest rates and the omnipresent political pressure to favour lower interest rates.

Key events in Turkey this week: Central Government Debt Stock (Monday) – Capacity Utilization, Manufacturing Confidence (Tuesday) – Economic Confidence Index (Friday).

Eminent issues on the back boiler: Progress (or lack of it) of the government’s new scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Much-needed structural reforms. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is advancing 0.13% at 13.6456 and a drop below 13.4317 (weekly low Feb.11) would expose 13.2327 (monthly low Feb.1) and finally 12.7523 (2022 low Jan.3). On the other hand, the next up barrier lines up at 13.6767 (weekly high Feb.15) seconded by 13.9319 (2022 high Jan.10) and then 18.2582 (all-time high Dec.20).

• NZD/USD has pushed back above 0.6700 on Monday despite global equities falling on geopolitical tensions.
• The pair is eyeing a break above key resistance in the 0.6730s, which would open the door towards 0.6800.
• NZD bulls are in charge ahead of this week’s key RBNZ meeting, amid chatter about a 50 bps hike.

Despite sharp downside in the global equity space on further escalation of military tensions between Ukrainian and pro-Russia separatist/Russia forces, as well as continued Russia/NATO tensions in the background, NZD/USD has managed to push back above 0.6700 on Monday. As this Wednesday’s RBNZ meeting – where markets participants are split between expecting a 25 bps or 50 bps hike – looms, the pair has gained 0.4% on the session and is one of the better G10 performers on the day.

NZD/USD bulls are intent on testing earlier monthly highs in the 0.6730s although escalating geopolitical angst continues to weigh heavily on other risk assets (like stocks) and could yet spoil the party. This is a key area of support turned resistance so far in 2022 and a break above it would open the door to a run back towards 0.6800 and annual highs near the 0.6900 level. Geopolitics aside, while Wednesday’s RBNZ meeting steals the show this week, New Zealand Q4 Retail Sales figures out on Friday will be of note for the kiwi traders.

There will also be plenty of US data and Fed speak to keep an eye on, the highlights of which include flash February PMIs, the second estimate of Q4 GDP growth and January Core PCE inflation. Markets have dialed down bets on a 50 bps rate hike in March after key FOMC members pushed back against the idea last week. A hot Core PCE reading – which would come on the heels of elevated Consumer and Producer Price Inflation readings for January – would bolster expectations for a rapid series of rate hikes between now and the end of the year.

In a discussion on recent nuclear exercises with his security council on Monday, Russian President Vladimir Putin accused Ukraine of not intending to fulfill the Minsk peace agreements, according to Reuters. As a result, Putin said that Russia ought to consider recognizing the independence of the two breakaway regions in Eastern Ukraine. If Russia faces the threat of Ukraine joining NATO, Putin continued, the threat to our country will increase substantially.

Meanwhile, Russia's Foreign Minister Sergey Lavrov said that the West isn't willing to discuss Russian security demands, whilst also accusing the West of "cherry-picking" from Russia's security proposals. However, Lavrov did say that diplomatic efforts with the US should continue and noted that there had been some progress in talks with the US. 

• Gold hit fresh multi-month highs near the $1910 on Monday but has since dropped back under the $1900 handle.
• Geopolitics remains the wildcard that could stoke surprise volatility in either a bullish or bearish direction.

Spot gold (XAU/USD) prices hit fresh multi-month highs near the $1910 on Monday during Asia Pacific session, but have again failed to hold to the north of the $1900 handle. In recent trade, the precious metal has been caught going sideways in the mid-$1890s, with the prospect for a fresh push higher again on Monday limited by the lack of market volumes stateside. US markets are shut on Monday for President’s Day so it is likely to be a very quiet US session.

Geopolitics remains the wildcard that could stoke surprise volatility in either a bullish or bearish direction. The Russian rouble has been coming under significant pressure on Monday, indicative of rising fears of a Russian invasion/military incursion into Ukraine that would trigger a round of sanctions from Western countries on Moscow. Violence between pro-Russia separatists and Ukraine’s military in the contested Donbas region has continued on Monday, the former group upping the inflammatory rhetoric in accusing Ukraine’s military of shelling and planning a full-scale assault.

This is keeping gold underpinned close to recent highs. At current levels in the mid-$1890s, the precious metal trades close to flat on the day and only about 0.75% below earlier session highs. One bearish risk to note for gold is whether a summit between Russian President Vladimir Putin and US President Joe Biden goes ahead this week following recent chatter. The meeting could be a good opportunity to ease tensions somewhat. Otherwise, US data and Fed speak will be worth watching, but will, for the most part, play second fiddle to the Ukraine crisis.

• AUD/USD regained positive traction on Monday, albeit struggled to capitalize on the move.
• Modest USD weakness was seen as a key factor that contributed to the intraday move up.
• Russia-Ukraine tensions dented the risk sentiment and capped the perceived riskier aussie.

The AUD/USD pair retreated a few pips from the daily high and was last seen trading around the 0.7200 round-figure mark, still up 0.40% for the day.

The pair attracted fresh buying on the first day of a new week, though a turnaround in the global risk sentiment kept a lid on any further gains for the perceived riskier aussie. The early optimism faded rather quickly after a Kremlin spokesperson said that there were no concrete plans yet for a Putin-Biden meeting.

Adding to this, UK Foreign Minister Liz Truss noted that a Russian invasion of Ukraine looks highly likely. Moreover, a spokesperson for Germany's foreign ministry noted that we are in an extremely dangerous situation and sanctions against Russia would be put in place after further infringements of Ukraine.

Meanwhile, Russian state-controlled media, citing Russian military officials, said that five people who tried to cross the Ukraine/Russian border were killed. The officials further added Ukrainian armed vehicles were also destroyed in Russia's Rostov region, fueling fears of an imminent Russian invasion of Ukraine.

This, in turn, tempered investors appetite for perceived riskier assets, which was evident from a fresh leg down in the global equity markets. The anti-risk flow extended some support to the safe-haven US dollar and turned out to be a key factor that held back bulls from placing aggressive bets around the AUD/USD pair.

There isn't any major market-moving economic data due for release from the US on Monday, leaving the AUD/USD pair at the mercy of the broader market risk sentiment. The focus, however, will be on the upcoming meeting between the US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov planned for February 24.

Technical levels to watch

• EUR/USD flirts with the 5-month line near 1.1370.
• The next up barrier comes at the weekly high at 1.1395.

EUR/USD fades the initial spike to the 1.1390 region on Monday.

Extra gains in the pair needs to clear the 5-month line near 1.1370 to alleviate downside pressure and allow for another test of the weekly high at 1.1395 (February 14). Further up is seen the 200-week SMA at 1.1487 closely followed by the 2022 peak at 1.1494 (February 10).

In the longer run, EUR/USD is expected to keep the negative outlook as long as it trades below the key 200-day SMA, today at 1.1637.

EUR/USD daily chart

According to Russian state-controlled media citing Russian military officials on Monday, Russian troops and border guards prevented Ukrainian "saboteurs" from breaching the Ukraine/Russian border. Five people who tried to cross the border were killed, the officials said, and Ukrainian armed vehicles were also destroyed in Russia's Rostov region. 

• Silver witnessed an intraday turnaround from the four-week high touched last week on Friday.
• The setup favours bullish traders and supports prospects for the emergence of some dip-buying.
• Sustained strength beyond the $24.00 mark is needed to confirm the near-term positive outlook.

Silver continued with its struggle to find acceptance above the $24.00 mark and witnessed an intraday turnaround from the four-week high touched last week on Friday. The white metal, for now, seems to have snapped three days of the winning streak and was last seen trading near the daily low, around the $23.75-$23.70 region heading into the North American session.

From a technical perspective, the recent strong rebound from the monthly low, around the $22.00 mark has been along an upward sloping channel and points to a short-term uptrend. The constructive set-up is reinforced by the fact that technical indicators on the daily chart are holding comfortably in the positive territory and are still far from being in the overbought zone.

That said, repeated failures near the aforementioned handle warrant some caution for aggressive bullish traders. This makes it prudent to wait for sustained strength beyond the $24.00 mark before positioning for a move towards the $24.25 confluence hurdle. The latter comprises the very important 200-day SMA and a descending trend-line extending from July 2021 swing high.

A convincing breakthrough will be seen as a fresh trigger for bullish traders and lift the XAG/USD back towards the YTD high, around the $24.70 region. The momentum could further get extended towards reclaiming the key $25.00 psychological mark en-route November 2021 high, around the $25.35-$24.40 region.

On the flip side, any further decline pullback is likely to find decent support near the $23.30 region ahead of the $23.round-figure mark. Failure to defend the said support levels will shift the bias in favour of bearish traders and make the XAG/USD vulnerable. The next relevant support is pegged near the $22.75 region, below which the metal could slide to the mid-$22.00 mark.

Silver daily chart

Technical levels to watch

• DXY reverses the recent strength and drops below 96.00.
• The positive stance remains unchanged above the 5-month line.

DXY fades two consecutive sessions with gains and drops to as low as the 95.70 region on Monday.

The index seems to have moved into a consolidative phase for the time being. A close above last week’s top at 96.43 (February 14) should open the door to further upside in the near term.

The short-term constructive stance remains supported by the 5-month line, today near 95.40, while the outlook for the dollar is seen as positive above the 200-day SMA at 93.76 in the longer run.

DXY daily chart

• EUR/USD has pulled back from earlier highs near 1.1400 and is back under 1.1350 as geopolitical angst dampens sentiment.
• However, strong Eurozone PMI data, which showed a strong service sector recovery this month, is slowing the decline.
• The pair still trades in the green by about 0.2%.

A continued escalation in violence in Ukraine’s Donbass region and further inflammatory rhetoric from pro-Russia separatist forces located there, coupled with uncertainty over whether this week’s alleged Biden-Putin summit will go ahead has seen risk appetite pare back recently. After topping out in the 1.1390 area shortly after Monday’s European open, EUR/USD has subsequently dropped back below the 1.1350 mark, where it still trades with gains of about 0.2% on the day. Eurozone flash PMI surveys for February were released earlier on Monday and showed a significantly better than expected rebound in service sector sentiment, reflective of falling Omicron infection rates and associated restrictions being eased.

That strong service sector recovery has helped ease the pace of EUR/USD’s pullback from earlier session highs and, near the 1.1350 mark, the pair is trading bang in the middle of its recent 1.1310s-1.1390s range of the past few sessions. FX strategists suspect FX market conditions will remain choppy on Ukraine crisis uncertainty in the coming days. Aside from geopolitics, Fed speak, US flash PMIs, January US Core PCE inflation and any further commentary from ECB policymakers will all be worth a watch as traders assess the timing and pace of Fed/ECB monetary tightening.

With EUR/USD sat close to the middle of 2022’s low-1.1100s to 1.1500 range, the pair’s medium-term technical bias remains neutral. Trading conditions will be unusually quiet this Monday due to US market closures for President’s Day holiday.

• GBP/USD regained positive traction on Monday amid the emergence of fresh USD selling.
• Russia-Ukraine tensions tempered the initial optimism and helped limit the USD downfall.
• Bulls need to wait for sustained breakthrough a downwards sloping trend-line resistance.

The GBP/USD pair attracted fresh buying on the first day of a new week and climbed to the 1.3640 area, back closer to the monthly high tested last week.

The optimism led by the news that US President Joe Biden and his Russian counterpart Vladimir Putin have agreed in principle to hold a summit on the Ukraine crisis undermined the safe-haven US dollar. Apart from this, rising bets for an additional interest rate hike by the Bank of England acted as a tailwind for the British pound and provided an additional lift to the GBP/USD pair.

The initial market reaction, however, turned out to be short-lived and faded rather quickly after a Kremlin spokesperson said that there were no concrete plans yet for a Putin-Biden meeting. Adding to this, UK Foreign Minister Liz Truss said that a Russian invasion of Ukraine looks highly likely drove some haven flows towards the buck and capped gains for the GBP/USD pair.

From a technical perspective, the pair, so far, has been struggling to break through a downward sloping trend-line resistance extending from July 2021. This is closely followed by the very important 200-day SMA, around the 1.3685 region and the 1.3700 mark. Sustained strength beyond will set the stage for a further appreciating move amid bullish technical indicators on the daily chart.

The GBP/USD pair might then aim to retest the YTD high, around mid-1.3700s before extending the momentum further towards reclaiming the 1.3800 mark for the first time since October 2021.

On the flip side, any meaningful might continue to attract some dip-buying near the 1.3600 mark and remain limited near the 1.3575-1.3570 region. Some follow-through selling, leading to subsequent weakness below near mid-1.3500s could make the GBP/USD pair vulnerable. The downward trajectory could then get extended towards challenging the key 1.3500 psychological mark.

GBP/USD daily chart

Technical levels to watch

In opinion of Quek Ser Leang at UOB Group’s Global Economics & Markets Research, USD/IDR should remain side-lined within the 14,270-14,380 range for the time being.

Key Quotes

“The sharp drop in USD/IDR to 14,240 and the subsequent swift rebound came as a surprise (we were expecting USD/IDR to trade sideways).”

“The rapid swings have resulted in a mixed outlook and for this week, USD/IDR could continue to trade in a choppy manner, expected to be between 14,270 and 14,380.”

• EUR/JPY reverses the recent weakness and bounces off 130.00.
• Gains remain in the pipeline above the 2-month line.

EUR/JPY leaves behind the negative performance witnessed in the second half of last week and manages to regain some shine on Monday.

EUR/JPY broke below the key 200-day SMA (130.41) and in doing so it has opened the door to extra losses in the very near term at least. That said, the 55-day SMA around 129.90 emerges as an interim support prior to the 2-month line, today near 128.80.

While above this line, further upside in the cross should remain on the table in the very near term. On the longer term, the outlook for the cross is seen as negative as long as it trades below the 200-day SMA.

EUR/JPY daily chart

"Diplomacy must be pursued but a Russian invasion of Ukraine looks highly likely," UK Foreign Minister Liz Truss said on Monday, as reported by Reuters.

"The UK and allies are stepping up preparations for the worst-case scenario," Truss further noted. "We must make the cost for Russia intolerably high."

Market reaction

The UK's FTSE 100 Index continues to edge lower following these comments and was last seen trading flat on the day at 7,517. Meanwhile, the GBP/USD pair stays in the positive territory near 1.3630.

The German economy is expected to contract again in the first quarter of the year, Germany's central bank, Bundesbank, noted in its monthly report on Monday, as reported by Reuters.

"Unlike in previous waves of the pandemic it is not just activity in the services sector that is likely affected by containment measures and behavioural changes," Bundesbank explained in its publication. "Instead, pandemic-related absence from work is likely to dampen economic activity markedly also in other sectors."

Market reaction

The EUR/USD pair showed no immediate reaction to this headline and was last seen trading at 1.1360, where it was up 0.35% on a daily basis.

The Malaysian ringgit is expected to keep its consolidation intact vs. the greenback in the 4.1760-4.1960 range for the time being, suggested Quek Ser Leang at UOB Group’s Global Economics & Markets Research.

Key Quotes

“We expected USD/MYR to trade within a range of 4.1750/4.2000 last week. USD/MYR subsequently traded within a narrower range than expected (4.1800/4.1920).”

“The quiet price actions offer no fresh clues and we continue to expect USD/MYR to trade sideways, expected to be between 4.1760 and 4.1960.”

A spokesperson for Germany's foreign ministry said on Monday that sanctions against Russia would be put in place after further infringements of Ukraine, as reported by Reuters.

Additional takeaways

"French foreign minister will discuss Ukraine with German foreign minister after the cabinet meeting."

"We are in an extremely dangerous situation."

"Not aware of any consideration of sanctions against Belarus."

"Scholz will speak with Putin by phone this afternoon."

Market reaction

These comments don't seem to be having a significant impact on risk sentiment. As of writing, the US Dollar Index was down 0.3% on the day at 95.82.

Oleksiy Danilov, secretary of Ukraine's national security and defence council, said on Monday that they do not conduct any military operations against the civilian population, as reported by Reuters.

Danilov further noted that they need to participate if US President Joe Biden were to have a meeting with Russian President Vladimir Putin.

Meanwhile, Sputnik news reported, citing the head of the self-proclaimed Donetsk People’s Republic (DPR), Ukrainian forces were using heavy artillery, mortars, grenade launchers and tanks.

Market reaction

The market mood seems to have soured following these headlines but the US Dollar Index, which tracks the greenback's performance against a basket of six major currencies, stays in the negative territory near 95.80.

• A combination of factors dragged USD/CHF to a fresh monthly low on the first day of a new week.
• A broad-based USD weakness was seen as a key factor that acted as a headwind for the major.
• The early optimism in the markets faded quickly and boosted demand for the safe-haven CHF.

The USD/CHF pair dropped to a fresh monthly low during the first half of the European session and was last seen flirting with the 200-day SMA, around the 0.9175 region.

The pair struggled to capitalize on its early uptick, instead met with a fresh supply near the 0.0.9215 region on Monday and now seems set to prolong its recent downfall witnessed over the past week or so. The US dollar came under some renewed selling pressure amid expectations that the Fed would adopt a less aggressive policy stance to combat stubbornly high inflation. Apart from this, Russia-Ukrain tensions benefitted the Swiss franc's relative safe-haven status and further contributed to the USD/CHF pair's intraday decline.

The early optimistic move in the equity markets faded rather quickly after a Kremlin spokesperson said that there were no concrete plans yet for a Putin-Biden meeting. Apart from this, the market fears about an imminent Russian invasion of Ukraine continued lending some support to traditional safe-haven assets. In fact, satellite images showed multiple new deployments of Russian military units near the border with Ukraine.

Moreover, Russia extended military drills in Belarus that were due to end on Sunday. Hence, the focus will be on the upcoming meeting between the US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov planned for February 24. In the meantime, investors will keep a close eye on developments surrounding the Ukraine conflict, which will influence the risk sentiment and provide some impetus to the USD/CHF pair.

From a technical perspective, sustained break below a technically significant 200-day SMA might be seen as a fresh trigger for bearish traders. This, in turn, will set the stage for a further near-term depreciating move for the USD/CHF pair amid absent relevant market moving economic releases. The pair could then accelerate the downward momentum and aim back to challenge the 0.9100 round-figure mark in the near term.

Technical levels to watch

Quek Ser Leang at UOB Group’s Global Economics & Markets Research noted that USD/THB could still lose some ground in the near term.

Key Quotes

“We highlighted last week that ‘there is scope for the weakness in USD/THB to extend’. We added, ‘in view of the oversold conditions, the next major support at 32.18 is not expected to come into the picture’. The anticipated weakness exceeded our expectations as USD/THB plummeted to a low of 32.09 on Thursday (17 Feb).”

“Further USD/THB weakness is not ruled out but conditions remain deeply oversold and a sustained decline below 31.95 appears unlikely (next support is at 31.62). On the upside, a breach of 32.32 would indicate that the current USD/THB weakness has stabilized.”

• USD/CAD consolidates the rebound below 1.2750 amid Kremlin comments.
• The oil price recovery, US dollar’s weakness make it a tough ask for bulls.
• Daily technical indicators point to upside risks for the major.

USD/CAD is recovering from daily lows of 1.2722, although trades below 1.2750, with the rebound fading amid persisting risk-on market profile.

In the last hour, the upbeat market mood cooled off a bit after Kremlin came out with a statement, citing that there are no concrete plans yet of a Putin-Biden meeting.

The proposed diplomatic talks between the US and the Russian leaders this week were the main reason behind the sudden lift to the market sentiment, earlier on.

With the White House officials confirming the meeting, however, investors still remain hopeful of de-escalation through the diplomacy of the Ukraine crisis, keeping the risk sentiment fairly stable and the greenback still undermined. The renewed uptick in WTI prices also caps the rebound in the USD/CAD pair.

Technically, USD/CAD needs to find acceptance above the 1.2750 psychological barrier to extend the recovery momentum towards the February highs of 1.2789.

The 14-day Relative Strength Index (RSI) is pointing lower but holds above the midline, keeping buyers hopeful.

Further, adding credence to the bullish view, the 21-Daily Moving Average (DMA) is set to cut the horizontal 50-DMA for the upside, signaling a bull cross.

USD/CAD: Daily chart

On the flip side, strong support is seen at the 21 and 50-DMAs confluence of 1.2707, below which the recent range lows near 1.2670 will be put to test.

Further south, the critical horizontal 100-DMA support at 1.2626 will come to the rescue of bulls.

USD/CAD: Additional levels to consider

• EUR/USD looks bid and regains the upside to 1.1390.
• The better mood in the risk complex puts the dollar under pressure.
• Germany, EMU Flash Manufacturing PMI surprised to the downside.

The single currency leaves behind two sessions in a row with losses and pushes EUR/USD back to the vicinity of the 1.1400 mark on Monday.

EUR/USD bolstered by risk appetite

EUR/USD climbed to fresh tops around 1.1390 earlier in the session on the back of the firmer note in the risk-associated universe at the beginning of the week. Indeed, positive news coming from the Russia-Ukraine conflict lends wings to the appetite for riskier assets and underpins the daily rebound in the pair.

The move higher in spot is also propped up by the uptick in yields of the German 10y Bund to the vicinity of 0.24%, reversing at the same time three consecutive daily retracements.

In the domestic calendar, advanced Manufacturing PMIs in Germany and the euro area surprised to the downside at 58.5 and 58.4, respectively, for the month of February.

Across the pond, markets will be closed due to the President’s Day holiday.

What to look for around EUR

EUR/USD continues to look to the geopolitical scenario and the risk appetite trends for near-term direction. Further out, the improvement in the pair’s outlook appears underpinned by fresh speculation of a potential interest rate hike by the ECB at some point by year end, higher German yields, persevering elevated inflation and a decent pace of the economic activity and other key fundamentals in the region

Key events in the euro area this week: Germany, EMU Flash PMIs (Monday) – Germany IFO survey (Tuesday) – Germany GfK Consumer Confidence, EMU Final January CPI (Wednesday) – Eurogroup Meeting, Germany Final Q4 GDP, EMU Final Consumer Confidence, ECB Lagarde (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine conflict.

EUR/USD levels to watch

So far, spot is gaining 0.38% at 1.1361 and faces the next up barrier at 1.1395 (weekly high Feb.16) followed by 1.1487 (200-week SMA) and finally 1.1494 (2022 high Feb.10). On the other hand, a drop below 1.1296 (low Feb.15) would target 1.1279 (weekly low Feb.14) en route to 1.1186 (monthly low Nov.24 2021).

• Gold witnessed an intraday pullback from a fresh multi-month high touched earlier this Monday.
• Hope for a diplomatic resolution of Russia-Ukraine tensions undermined the safe-haven metal.
• Modest USD weakness extended some support to the commodity and helped limit the downside.

Gold witnessed good two-way price moves through the early European session and was last seen trading modest losses, just below the $1,900 round-figure mark. News that US President Joe Biden and his Russian counterpart Vladimir Putin have agreed in principle to hold a summit on the Ukraine crisis raised hopes for a diplomatic solution to the East-West standoff. This, in turn, lifted the global risk sentiment and tempered demand for traditional safe-haven assets. This was seen as a key factor behind the commodity's intraday pullback from the $1,908 region, or the highest level since June 11 touched earlier this Monday.

The early optimistic move in the markets, however, faded rather quickly after a Kremlin spokesperson said that there were no concrete plans yet for a Putin-Biden meeting. Apart from this, the market fears about an imminent Russian invasion of Ukraine assisted gold to attract some dip-buying near the $1,888-$1,887 region. Satellite images showed multiple new deployments of Russian military units near the border with Ukraine. Moreover, Russia extended military drills in Belarus that were due to end on Sunday. Apart from this, a broad-based US dollar weakness extended some support to the dollar-denominated commodity.

The minutes of the January 25-26 FOMC meeting did little to reinforce expectations for a 50 bps rate hike in March and raised uncertainty about the Fed's tightening plans. Adding to this, the recent geopolitical development could force the Fed to adopt a less aggressive policy stance to combat stubbornly high inflation. This, in turn, kept the USD bulls on the defensive and acted as a tailwind for the non-yielding yellow metal, at least for the time being. This makes it prudent to wait for strong follow-through selling before confirming that gold has topped out and positioning for any meaningful corrective slide.

Investors might also refrain from placing aggressive directional bets ahead of a meeting between the US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov planned for February 24. Given that US banks are closed on Monday in observance of Presidents' Day, the broader market risk sentiment will be looked upon to grab some short-term opportunities around gold.

Technical outlook

From a technical perspective, gold, so far, has struggled to find acceptance above the $1,900 mark, though the emergence of some dip-buying favours bullish traders. This, along with last week's bullish breakout through a downward sloping trend-line extending from June 2021, supports prospects for additional near-term gains.

That said, RSI (14) on the daily chart remains closer to the overbought zone, suggesting that any subsequent move up is more likely to remain capped near 2021 high, around the $1,916 area. Sustained strength beyond will be seen as a fresh trigger for bullish traders and set the stage for an extension of the recent appreciating move.

On the flip side, any meaningful pullback is likely to find support near the $1,879-$1,877 region. Any further decline could be seen as a buying opportunity, which, in turn, should help limit the slide for gold near the aforementioned trend-line resistance breakpoint, around the $1,855 zone.

Gold daily chart

Key levels to watch

USD/CNH could extend the downtrend and retest the 6.3130 level in the near term, commented FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our expectations for USD to ‘trade between 6.3290 and 6.3420’ last Friday was incorrect as it plummeted to 6.3180 before rebounding quickly to trade mostly sideways. Downward momentum has not improved by much but there is scope for USD to dip below 6.3180. For today, the next support at 6.3130 is unlikely to come under threat. Resistance is at 6.3295 followed by 6.3350.”

Next 1-3 weeks: “In our latest narrative from last Wednesday (16 Feb, spot at 6.3390), we highlighted that USD is likely to head lower towards 6.3230. Our view was not wrong as USD dropped to 6.3180 on Friday (18 Feb). Downward momentum has improved, albeit not by much. That said, USD could weaken to 6.3130. A clear break of this level could potentially lead to further weakness to the round-number support of 6.3000. The downside risk is intact as long as USD does not move above 6.3390 (‘strong resistance’ level previously at 6.3490).”

• UK Manufacturing PMI steadies at 57.3 in February, beats estimates.
• Services PMI in the UK comes in at 60.8 in February, a big beat.
• GBP/USD holds gains near 1.3635 on upbeat UK Preliminary PMIs.

The seasonally adjusted IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) steadies at 57.3 in February versus 57.2 expected and 57.3 – January’s final reading.

Meanwhile, the Preliminary UK Services Business Activity Index for February rose sharply to eight-month peaks, arriving at 60.8 versus January’s final readout of 54.1 and 55.5 expected.

Chris Williamson, Chief Business Economist at IHS Markit, commented on the survey

“The latest PMI surveys indicate a resurgent economy in February, as business activity leaped as COVID-19 containment measures were relaxed.”

"With the PMI’s gauge of output growth accelerating markedly in February and cost pressures intensifying to the second-highest on record, the odds of an increasingly aggressive policy tightening have shortened, with a third back-to-back rate rise looking increasingly inevitable in March.”

FX implications

Mixed UK Preliminary Manufacturing and Services PMIs keep the GBP bulls underpinned, as the GBP/USD pair hovers near-daily highs of 1.3639.

The spot is trading at 1.3635, adding 0.34% on a daily basis, at the press time.

• DXY starts the week on the defensive and drops to 95.70.
• Diminishing geopolitical risks lend support to the risk-on trade.
• US markets will be closed due to the President Day’s holiday.

The greenback, when tracked by the US Dollar Index (DXY), fades Friday’s uptick and refocuses on the downside at the beginning of the week.

US Dollar Index weighed down by risk appetite

The index reverses two consecutive daily advances and revisits the 95.70 region on Monday in response to the broad-based improvement in the risk complex, particularly following auspicious news from the Russia-Ukraine front.

Indeed, US Blinken will meet his Russian peer Lavrov later in the week, while a potential Biden-Putin summit could be also in the pipeline, all collaborating with the current bias towards the riskier assets.

Absent releases in the US docket, the speech by FOMC M.Bowman (permanent voter, centrist) will be the sole event later in the NA session.

What to look for around USD

Better news on the Russia-Ukraine-US standoff lends some support to the risk-associated universe and weighs on the dollar at the beginning of the week. However, the recent corrective downside in the buck was deemed as temporary only, as the positive stance in the dollar remains underpinned by the current elevated inflation narrative as well as the probability of a more aggressive start of the Fed’s normalization of its monetary conditions. Looking at the longer run, and while the constructive outlook for the greenback appears well in place for the time being, recent hawkish messages from the BoE and the ECB carry the potential to undermine the expected move higher in the dollar in the next months.

Key events in the US this week: House Price Index, Flash Manufacturing PMI, CB Consumer Confidence (Tuesday) – MBA Mortgage Applications (Wednesday) – Advanced Q4 GDP, Initial Claims, New Home Sales (Thursday) – PCE, Durable Goods Orders, Personal Income/Spending, Pending Home Sales, Final Consumer Sentiment (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict under the Biden administration. Debt ceiling issue.

US Dollar Index relevant levels

Now, the index is losing 0.31% at 95.80 and a break above 96.43 (weekly high Feb.14) would open the door to 97.44 (2022 high Jan.28) and finally 97.80 (high Jun.30 2020). On the flip side, the next down barrier emerges at 95.67 (weekly low Feb.16) seconded by 95.17 (weekly low Feb.10) and then 95.13 (weekly low Feb.4).

• A combination of supporting factors assisted AUD/USD to regain positive traction on Monday.
• The risk-on impulse undermined the safe-haven USD and benefitted the perceived riskier aussie.
• Upbeat Australian PMI prints provided an additional boost and remained supportive of the move.

The AUD/USD pair maintained its strong bid tone through the early European session and was last seen trading near the daily high, around the 0.7215 region.

Investors turned optimistic on the first day of a new week after US President Joe Biden and his Russian counterpart Vladimir Putin agreed in principle to hold a summit on the Ukraine crisis. This, in turn, provided a goodish lift to the global risk sentiment, which prompted fresh selling around the safe-haven US dollar and benefitted the perceived riskier aussie.

Adding to this, upbeat Australian PMI prints provided an additional boost to the domestic currency and remained supportive of the AUD/USD pair intraday move up. In fact, the IHS Markit Flash Manufacturing PMI pointed to a further expansion in February and rose to 57.6 from the 55.1 previous. Moreover, the gauge for the services sector jumped to 56.4 – an eight-month high.

The data further boosted market bets for an interest rate hike by the Reserve Bank of Australia (RBA). On the other hand, uncertainty about the Fed's tightening plans further weighed on the buck and extended additional support to the AUD/USD pair. It is worth recalling that the January FOMC meeting minutes failed to reinforce expectations for a 50 bps rate hike in March.

Moreover, the latest geopolitical developments might force the Fed to adopt a less aggressive policy stance to combat high inflation. This, along with the recent pullback in the US Treasury bond yields, kept the USD bulls on the defensive. That said, the market fears about an imminent Russian invasion of Ukraine could lend some support to the USD and cap the AUD/USD pair.

US-based satellite imagery company Maxar reported multiple new deployments of Russian military units near the border with Ukraine. Adding to this, Russia extended military drills in Belarus that were due to end on Sunday. the focus will be on the upcoming meeting between the US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov planned for February 24.

In the meantime, the broader market risk sentiment will drive the USD demand and provide some impetus to the AUD/USD pair amid absent relevant market moving economic releases. The US banks are closed on Monday in observance of Presidents' Day, which might hold back traders from placing aggressive bullish bets and keep a lid on any meaningful upside for the AUD/USD pair.

Technical levels to watch

• Eurozone Manufacturing PMI arrives at 58.4 in February vs. 58.7 expected.
• Bloc’s Services PMI jumps to 55.8 in February vs. 52.0 expected.
• EUR/USD is retreating towards 1.1350 on Kremlin’s statement and mixed PMIs.

The Eurozone manufacturing sector activity expanded but less than expected in February, the latest manufacturing activity survey from IHS/Markit research showed on Monday.

The Eurozone Manufacturing purchasing managers index (PMI) arrived at 58.4 in February vs. 58.7 expectations and 58.7 last. The index hit two-month lows.

The bloc’s Services PMI jumped sharply 55.8 in February vs. 52.0 expected and 51.1 previous. The indicator hit three-month highs.

The IHS Markit Eurozone PMI Composite rose to 55.8 in February vs. 52.7 estimated and 52.3 previous. The gauge reached the highest in five months.

Comments from Chris Williamson, Chief Business Economist at IHS Markit

“The eurozone economy regained momentum in February as an easing of virus-fighting restrictions led to renewed demand for many consumer services, such as travel, tourism and recreation, and helped alleviate supply bottlenecks.”

“Business optimism in the outlook has likewise improved as companies look to the further reopening of the economy, encouraging increased hiring.”

FX implications

Kremlin’s statement has re-ignited the risk-off market sentiment, with the high beta assets paring back gains.

The euro is also bearing the brunt, as EUR/USD extends the retreat from daily highs of 1.1388. The Eurozone data plays a second fiddle amid ongoing Russia-Ukraine geopolitical tensions.

The spot was last seen trading at 1.1364, up 0.41% on the day.

The Reserve Bank of New Zealand (RBNZ) will provide their latest policy update in the week ahead. There is a high likelihood that the RBNZ delivers a larger 50bps hike which poses upside risks for the NZD, economists at MUFG report.

High hurdle remains for a hawkish RBNZ policy surprise

“The RBNZ would need to deliver a 0.50 point hike and encourage expectations for consecutive larger hikes to significantly lift short-term rates. The RBNZ is also expected to announce plans to begin shrinking their balance sheet from the middle of this year by selling assets of around NZD5-10bn/year.”

“In light of higher inflation, tighter labour market conditions, the buoyant housing market, and long gap since the last RBNZ policy meeting, we believe there is a high risk of a 0.50 point hike. It poses some upside risk for the NZD in the near-term.”

A Kremlin spokesperson said on Monday that there were no concrete plans yet for a meeting between Russian President Vladimir Putin and US President Joe Biden, as reported by Reuters.

"US and Russian presidents can decide to set up a call or a meeting at any moment if necessary," the spokesperson added. "A meeting between Russian and US foreign ministers is possible this week."

Market reaction

This headline seems to be causing the market mood to sour slightly. The EUR/USD pair, which climbed to 1.1380 earlier in the session, was last seen trading at 1.1365, where it was still up 0.4% on a daily basis.

Economists at the Bank of America Global Research note that USD/JPY’s uptrend remains intact but the pair needs to surpass the year-to-date high at 116.35 to enjoy further gains.

Break below 113.47 to confirm a double top from YTD peaks

“USD/JPY needs to clear 116.35 (YTD high) for 117.40 and possibly the top of channel at 118.60-119.”

“Alternatively, below 113.47 confirms a double top from YTD peaks at 116.34/116.35.”

EUR/NOK is near a multimonth trend line at 10.23. Above here, the pair could enjoy further gains towards 10.40, then 10.65/70, economists at Société Générale report.

Recent low at 9.90 cushions downside

“EUR/NOK is in vicinity to the descending trend line drawn since April 2020 at 10.23. If this is overcome, an extended bounce could materialize towards 10.40 and projections of 10.65/10.70.”

“Recent low at 9.90 cushions downside.”

Euro Stoxx 50 uptrend has paused after reaching 4415 in November. Economists at Société Générale note that the index could slump as low as 3860 on a break under the 4010 mark.

A short-term bounce is on the cards

“It has formed a Head and Shoulders and is near the neckline at 4010. The pattern points towards potential downside.” 

“Short-term, a bounce can’t be ruled out however the index has to establish itself above right shoulder level at 4260 to negate the formation.”

“If a break below the neckline at 4010 materializes, the decline could extend towards projections of 3910 and 3860.”

GBP/USD clings to modest daily gains above 1.3600. Economists at OCBC Bank expect the pair to test the 1.3650 mark again this week.

Downside support remains at 1.3480/00

“The gains in the GBP/USD again stalled ahead of 1.3650 on Friday. Bias is for another test early week.”

“Downside support remains at 1.3480/00.”

• German Manufacturing PMI arrives at 58.5 in February vs. 59.5 expected.
• Services PMI in Germany expands to 56.6 in February vs. 53.0 expected.
• EUR/USD keeps its uptrend intact above 1.1350 on mixed German PMIs.

The German manufacturing sector slows its pace of expansion in February, the preliminary manufacturing activity report from IHS/Markit research showed this Monday.

The Manufacturing PMI in Eurozone’s economic powerhouse came in at 58.5 this month vs. 53.0 expected and 52.2 prior. The index clocked two-month lows.

Meanwhile, Services PMI rebounds from ten-month lows of 52.2 booked previously to 56.6 in February and as against 53.0 estimated. The PMI jumped to the highest level in six months.

The IHS Markit Flash Germany Composite Output Index arrived at 56.2 in February vs. 54.3 expected and January’s 53.8. The gauge hits a six-month top.

Key comments from Phil Smith, Economics Associate Director at IHS Markit

“The German economy continued to regain momentum in February following December’s brief stagnation in output growth. Overall activity rose the most since last August, driven this time by the services sector as manufacturing production increased more slowly than in January when it had provided the main impetus.”

“Although goods production rose at a softer pace, data on new orders showed the fastest rise in six months. Moreover, supply chain pressures appeared to ease further as average lead times lengthened to the least extent since November 2020. Inflationary pressures remained strong, however.”

FX implications

EUR/USD is holding the higher ground well above 1.1350, adding 0.47% on the day. The spot extends its gains amid the risk-on market mood, as investors remain hopeful for de-escalation of the Russia-Ukraine crisis.

EUR/USD recoups combined losses of Thursday and Friday. The pair could enjoy considerable gains on a break above 1.1410, economists at Société Générale report.

1.1260 and 1.1210 are short-term supports

“A break above daily Ichimoku cloud at 1.1410 can lead to extension in bounce.”

“1.1260 and 1.1210, the 76.4% retracement of the rebound are short-term supports.”

See: EUR/USD set to move back to the 1.13 level – ING

Over the near-term, economists at HSBC believe there is greater scope for the Bank of England (BoE) to disappoint market expectations of a 50bp hike in March. They expect the GBP to weaken against the USD in 2022.

Intensifying challenges

“The BoE meeting on 17 March may deliver another dovish hike. As the BoE may disappoint the market in March, we expect the GBP to weaken against the USD over the next few weeks.”

“Even if the BoE were to somehow match the kind of pace priced into the market, the likelihood is that the rate hikes would not stick. As we approach equilibrium in rate expectations for G10 currencies,relative FX performance may be determined as much by where rates will eventually land as how quickly they rise in the coming months. Subsequently, the GBP outlook appears to be challenging.”

“The challenges we see for the GBP are not especially new but they appear to be intensifying, and the resilience of the currency during February leaves it vulnerable to a correction lower.” 

“Depending on the outcome of the 15-16 March Federal Open Market Committee’s (FOMC) meeting (which our economists expect a hike of 50bp) and Russia-Ukraine developments,the risks of a bigger move lower in the wake of the 17 March BoE meeting may grow.”

USD/ZAR has tested the 200-day moving average (DMA) at 14.90/14.85 which is also the low of November. A break below that region would open up losses to 14.45, then 14.10, economists at Société Générale report.

Late January peak at 15.75 to cap the upside

“Daily MACD is within negative territory which denotes upside momentum is lacking.”

“In case the support at 14.90/14.85 gets violated, there would be a risk of a deeper decline towards projections of 14.45 and 14.10.”

“A short-term bounce is expected; late January peak at 15.75 could cap the upside.”

• Renewed USD weakness prompted some selling around USD/JPY on Monday.
• The risk-on impulse undermined the safe-haven JPY and helped limit losses.
• Mixed fundamentals warrant some caution before placing fresh directional bets.

The USD/JPY pair remained depressed through the early European session and was last seen hovering near the lower end of its daily trading range, just below the 115.00 mark.

The US dollar met with a fresh supply on Monday and exerted some downward pressure on the USD/JPY pair, though the risk-on mood undermined the safe-haven Japanese yen and helped limit further losses. The January FOMC meeting minutes failed to reinforce market bets for a 50 bps rate hike in March. Moreover, expectations that the geopolitical developments might force the Fed to adopt a less aggressive policy stance to combat high inflation weighed on the buck and the major.

The downside, however, remains cushioned, at least for the time being, amid renewed hopes for a diplomatic solution to the East-West standoff over Ukraine. The office of French President Emmanuel Macron announced on Monday that US President Joe Biden and his Russian counterpart Vladimir Putin have agreed in principle to hold a summit on the Ukraine crisis. This, in turn, lifted the global risk sentiment and drove investors away from traditional safe-haven assets, including the JPY.

The combination of diverging forces held back traders from placing aggressive directional bets ahead of the upcoming meeting between the US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov planned for February 24. There isn't any major market-moving economic data due for release on the back of the Presidents' Day holiday in the US. Hence, it will be prudent to wait for some follow-through selling before positioning for any further depreciating move for the USD/JPY pair.

Technical levels to watch

The situation in the Donbas region remains volatile and strategists at ING suspect markets may be overpricing a "smooth" diplomatic solution too early. Downside risks for risk assets remain sizeable and they expect some support to USD and safe havens this week.

Safe havens still attractive

“Given the very unstable situation in the Donbas area and no guarantee that diplomatic efforts will be able to de-escalate tensions just yet, we continue to see a good deal of downside risk to risk assets in the short-term.”

“Given lingering geopolitical tensions and the lack of other very strong market drivers in the coming days (the US data calendar is very light), we think safe-haven currencies (USD, Japanese yen and Swiss franc) may find some support this week.”

“The dollar may receive some extra help from markets re-asserting bets on a 50bp Federal Reserve rate hike in March as some hawkish FOMC members speak this week. DXY could therefore continue to hold above 95.50.”

GBP/USD has started the new week on a firm footing. Additional gains are likely in case 1.3640 resistance fails, FXStreet’s Eren Sengezer reports.

The first technical resistance is located at 1.3640

“The initial resistance aligns at 1.3640 (static level) and the pair could attract buyers if it manages to flip that level into support. 1.3660 (static level, January 20 high) could be seen as the next target before 1.3700 (psychological level).”

“1.3600 (psychological level) is the first support. Below that level, the ascending trend line coming from late January and the 200-period SMA form the next strong support at 1.3560. A daily close below that level could be assessed as a bearish tilt in the technical outlook.”

See: GBP/USD set to test the 1.35 level – ING

USD/JPY continues to move sideways near 115.00. Economists at OCBC Bank expect the pair to target the 114.00 level on a break under the 114.80 support.

Headline driven

“Note that the implied valuations are climbing towards spot, a sign that the yield differentials are having a greater impact than risk dynamics.”

“Immediate support at 114.80, with a breach putting the 114.00/20 zone in sight.”

Sweden's krona has been an accurate benchmark for geopolitical tensions in Ukraine. Analysts at ING expect more volatility and downside risk for the SEK this week.

Riksbank minutes in focus amid geopolitical turmoil

“USD/SEK may edge back above 9.40 and EUR/SEK could approach 10.70 in the coming days.”

“We still expect European currencies to emerge as underperformers if tensions in Ukraine escalate further: the high-beta Norwegian krone and Swedish krona, in particular, remain highly vulnerable.”

“Markets will be watching the minutes of the Riksbank’s 9 February meeting. The Riksbank is largely seen as well behind the curve with its projections, so it will be key to see whether there was some opposition among members against the ultra-dovish stance. Any signals in this direction could give some help to the krona, although external factors should overshadow any Riksbank-related moves.”

EUR/USD is not currently embedding a great deal of geopolitical risk. Economists expect some support to USD, dragging the pair down to the 1.13 level.

Not much geopolitical risk in the price

“Unless the Ukrainian situation takes a decisive turn for the better, we see mostly downside risks for EUR/USD this week as the dollar could find some support and the EUR may start to embed more geopolitical risk.”

“We expect the eurozone data flow to be quite encouraging this week, starting with today’s PMIs which should see a rebound from the Omicron-induced slump in January. That should mostly be priced in by now, and we doubt that data will be able to give any material lift to the euro in the coming days.”

“A move back to 1.1300 would be warranted by fundamentals and the current market environment.”

The inverse correlation between gold and the US 10-year yield has broken down. A weaker US dollar is providing support, while higher inflation is negating downside risk of aggressive rate hikes, strategists at ANZ Bank report.

Gold ETF flows are recovering

“Rising geopolitical tensions are outweighing rising yields. Stronger than expected inflation is another key support, which is keeping the US dollar on a weaker footing and mitigating the chances of an aggressive rate hikes.”

“Investment demand is improving, with ETF holdings of gold up by 64t year-to-date. This follows a net liquidation of 300t in 2021. Investors are also adding fresh long positions in gold. Lean speculative positions leave room for a build-up of fresh longs and limited liquidation risk.”

“Physical gold demand in China was strong during the Lunar New Year holidays, as reflected in the gold spot premium. China imported nearly 818t of gold in 2021, and January imports are strong due to festive demand.”

Geopolitical risks are set to helping the Swiss franc. Economists at ING believe that the EUR/CHF pair can move below the 1.04 level.

SNB seems more relaxed towards a stronger CHF

“EUR/CHF may continue to stay pressured in the week ahead given its high exposure to the Ukrainian crisis.”

“Incidentally, a Swiss National Bank that seems more relaxed towards a stronger franc and widening EZ peripheral spreads all point to more weakness in the pair.”

“A break below 1.0400 looks likely in the coming days.”

• NZD/USD caught fresh bids on Monday and inched back closer to the monthly swing high.
• The risk-on impulse weighed on the safe-haven USD and benefitted the perceived riskier kiwi.
• Absent relevant economic releases warrant some caution before placing aggressive bullish bets.

The NZD/USD pair built on its steady intraday ascent through the early European session and climbed to a fresh daily high, around the 0.6725 region in the last hour.

The pair attracted fresh buying near the 0.6680 region on Monday and inched back closer to the monthly high, retested on the last day of the previous week amid modest US dollar weakness. The risk-on impulse turned out to be a key factor that undermined the safe-haven greenback and benefitted the perceived riskier kiwi.

The office of French President Emmanuel Macron announced on Monday that US President Joe Biden and his Russian counterpart Vladimir Putin have agreed in principle to hold a summit on the Ukraine crisis. This revived hopes for a diplomatic solution to the East-West stand-off and lifted the global risk sentiment.

The buck was further pressured by uncertainty about the Fed's tightening plans. The minutes of the January 25-26 FOMC meeting did little to reinforce expectations for a 50 bps rate hike in March. Moreover, the geopolitical developments could force the Fed to adopt a less aggressive policy stance to combat high inflation.

Hence, the market focus will remain on the upcoming meeting between the US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov planned for February 24. The fundamental backdrop seems tilted in favour of bulls, though absent relevant economic releases might hold back traders from placing aggressive bets.

Technical levels to watch

The pound was able able to count on some rather supportive data-flow this last week, as wage growth, inflation and retail sales all accelerated in January. Nevertheless, economists at ING believe that GBP/USD could challenge the 1.35 level on dollar strength.

Data to remain benign

“We expect a bounce in PMIs to endorse the good growth momentum for the UK economy. Markets will also keep a close eye on a number of BoE speakers including Governor Bailey (who testifies to the Parliament’s Treasury committee) and Chief Economist Pill.”

“Domestic factors are offering some shield to GBP, which is pricing in very little geopolitical risk.”

“While we expect the pound to face less downside risks compared to the euro in the week ahead, USD strength could push cable back to test 1.3500.”

EUR/USD has gained traction on improving market mood on Monday. The pair could target 1.1400 next in case the market mood remains upbeat, FXStreet’s Eren Sengezer reports.

Euro could target 1.1400 if risk-on mood stays intact

“Later in the session, IHS Markit will release the preliminary February Manufacturing and Services PMI reports for the euro area and Germany. The US markets will be closed in observance of Presidents Day, suggesting that geopolitical headlines will continue to impact EUR/USD's action.”

“First resistance is located at 1.1400 (psychological level, Fibonacci 23.6% retracement of the latest uptrend) ahead of 1.1450 (static level) and 1.1480 (static level).”

“On the downside, additional losses toward 1.1300 (psychological level, Fibonacci 50% retracement) could be witnessed in case buyers fail to defend the 1.1340/1.1350 area (Fibonacci 38.2%, 200-period SMA and 100-period SMA).”

FX Strategists at UOB Group noted the downside momentum in USD/JPY could accelerate in case of a breach of 114.75.

Key Quotes

24-hour view: “Last Friday, we expected USD to ‘trade between 114.75 and 115.25’. USD subsequently traded within a range of 114.78/115.29 before closing little changed at 115.00 (+0.06%). The price actions still appear to be part of a consolidation and we continue to expect USD to trade sideways, expected to be between 114.75 and 115.25.”

Next 1-3 weeks: “There is not much to add to our update from last Friday (18 Feb, spot at 115.40). As highlighted, downward momentum has improved but USD has to close below 114.75 before a sustained decline is likely. The chance for USD to close below 114.75 would remain intact as long as it does not move above 115.55 within these couple of days. Looking ahead, the next support below 114.75 is at 114.40.”

• Palladium remains depressed near intraday low, down for the second consecutive day.
• Descending trend line from January-end restricts immediate upside.
• Bearish MACD signals favor pullback moves, 50-SMA, five-week-old support line challenge sellers.

Palladium (XPD/USD) prices stay on the back foot for the second day in a row, down 0.70% intraday around d $2,325 heading into Monday’s European session.

The precious metal took a U-turn from a three-week-old descending resistance line the previous day as MACD teased bears.

Given the recently softer RSI line also backing the bears, the XPD/USD prices may retest the 50-SMA level of $2,290.

However, an upward sloping trend line from January 18, near $2,265, will challenge the palladium bears afterward, a break of which will direct the quote towards the 200-SMA level of $2,167.

Meanwhile, a clear upside break of the stated resistance line, near $2,360 at the latest, will direct XPD/USD bulls towards January’s peak of $2,415 before highlighting the late August 2021 swing high near $2,470.

Overall, palladium prices grind higher but bulls are not out of the woods.

Palladium: Four-hour chart

Trend: Further weakness expected

• GBP/USD regained positive traction on Monday amid the emergence of fresh USD selling.
• Hopes for a diplomatic solution to the Ukraine crisis weighed on the safe-haven greenback.
• Bets for more BoE rate hikes benefitted the GBP and remained supportive of the move up.

The GBP/USD pair maintained its bid tone through the early European session and was last seen trading near the daily high, around the 1.3620-1.3625 region.

Following Friday's pullback from the vicinity of mid-1.3600s or monthly high, the GBP/USD pair caught fresh bids on the first day of a new week and was supported by renewed US dollar selling bias. The latest optimism over hopes for a diplomatic solution to the East-West standoff over Ukraine lifted the global risk sentiment. This was evident from a goodish move up in the US equity futures, which, in turn, undermined the greenback's relative safe-haven status.

Apart from this, uncertainty about the Fed's tightening plans acted as a headwind for the buck. In fact, the minutes of the January 25-26 FOMC meeting did little to reinforce expectations for a 50 bps rate hike in March. Moreover, the latest geopolitical developments could force the Fed to adopt a less aggressive policy stance to combat stubbornly high inflation. This was evident from the recent pullback in the US Treasury bond yields, which further weighed on the USD.

On the other hand, the British pound was supported by rising bets for additional interest rate hikes by the Bank of England, boosted by last week's mostly upbeat UK macro data. That said, the lack of progress in talks to resolve the problems with the Northern Ireland protocol of the Brexit agreement held back bullish traders from placing aggressive bets around the GBP/USD pair. This makes it prudent to wait for some follow-through buying before positioning for any further gains.

Even from a technical perspective, the GBP/USD pair, so far, has struggled to make it through a resistance marked by a downward sloping trend-line extending from July 2021. The mentioned barrier should act as a key pivotal point, which if cleared decisively will mark a near-term bullish breakout and pave the way for a further appreciating move. Market participants now look forward to the flash UK Manufacturing and Services PMI for some short-term trading impetus.

Technical levels to watch

• USD/CAD remains pressured around intraday low after snapping three-day uptrend earlier in Asia.
• Putin-Biden readiness for Ukraine summit joins Blinken-Lavrov talks to underpin hopes of easing Moscow-Kyiv tension.
• OPEC+ shows readiness to increase output even as supply concerns loom.
• Financial markets in the US, Canada are off but risk catalysts may entertain traders.

USD/CAD grinds lower around 1.2730-25, down 0.25% intraday as European traders brace for Monday’s bell. The Loonie pair rose during the last two days before posting the daily losses of late.

Market’s risk-on mood, as well as softer prices of Canada’s main export item WTI crude oil, seems to recently weigh on the quote.

Fresh chatters over a summit between US President Joe Biden and his Russian counterpart Vladimir Putin underpin hopes of Ukraine diplomacy and favor the risk-on mood. Also keeping the traders optimistic is the scheduled meeting between US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov. Though, headlines conveying the US preparedness to levy harsh sanctions on Russia, in case of Ukrainian invasion, keep the market optimists on the edge.

On the other hand, WTI crude oil drops 0.80%, around $89.50 by the press time, as global producers mull for further easing of output. Also keeping the oil prices depressed are the talks over Iran’s denuclearization. It should be noted that the receding fears over the Ukraine-Russia issue also drag energy prices.

Amid these plays, the S&P 500 Futures reverse the early Asian loss of around 0.50% while the US Dollar Index (DXY) remains pressured around 95.80 by the press time.

It should be noted, however, that an extended weekend in the US and Canada may challenge USD/CAD traders for the day even if the risk catalysts signal further downside of the pair.

Technical analysis

USD/CAD not only bounces off an upward sloping trend line from January 26, near 1.2690, but also portrayed a bull cross on the daily chart. That said, the 21-DMA pierces the 50-DMA from below, which in turn suggests the pair’s further upside. Also adding to the bullish bias is the firmer RSI line, recently around 55.00. That said, the 61.8% Fibonacci retracement (Fibo.) of December 2021 to January 2022 downside, near 1.2770, restricts the immediate upside of the quote.

Considering preliminary readings for natural gas futures markets, open interest shrank for the second consecutive session at the end of last week, this time by around 7.1K contracts. Volume followed suit and dropped by around 67.2K contracts.

Natural Gas now looks to $4.80

Friday’s downtick in prices of natural gas was accompanied by shrinking open interest and volume, indicative that further decline appears not favoured and opening the door at the same time to a near-term rebound. That said, the next target emerges a next week’s peak around the $4.80 mark per MMBtu.

AUD/USD could extend the upside momentum to the 0.7250 region in the next weeks, according to UOB Group’s FX Strategists.

Key Quotes

24-hour view: “Our expectations for AUD to ‘trade sideways’ were incorrect as it popped to 0.7228 before pulling back sharply (low has been 0.7165). Despite the sharp pullback, downward momentum has barely improved and AUD is unlikely to weaken much further. For today, AUD is more likely to consolidate and trade between 0.7155 and 0.7215.”

Next 1-3 weeks: “Last Thursday (17 Feb, spot at 0.7205), we highlighted that risk has shifted to the upside and AUD could strengthen to 0.7250. AUD subsequently rose to a high of 0.7228 before pulling back sharply. While upward momentum has waned somewhat, there is no change in our view for now. Only a break of 0.7140 (no change in ‘strong support’ level) would indicate that 0.7250 is out of reach this time round.”

• USD/CHF is juggling around 0.9200 in a tight range of 40 pips as risk-aversion evaporates.
• Biden-Putin summit is likely to fade off the obscurity over the Russia-Ukraine tussle.
• The risk-on impulse pushes the US dollar index below the 96.00 mark.

The USD/CHF pair is struggling to breach 0.9200 on the upside, as the market sentiment turns positive on favorable developments over the Russia-Ukraine tensions. The acceptance of Russia’s Vladimir meeting proposal by US President Joe Biden to discuss the security in the Eurozone has cooled off the uncertainty. However, the major factor, which has favored risk-on impulse, is the stipulation that Russia doesn’t invade Ukraine.

For Russia, Biden has prepared a package of sanctions that includes barring the US financial institutions from processing transactions for major Russian banks, as per Reuters. This move is likely to keep Russia in control, as a violation of not invading Ukraine may pose serious threats to the Russian economy.

The US dollar index (DXY) is trading below 96.00, 0.2% lower against Friday’s close, as investors cash their funds from the safe-haven greenback amid the risk-on impulse in the markets.

Meanwhile, investors are looking forward to the cues that can help them to decide the extent of policy tightening by the Federal Reserve (Fed). The rising bets upon a 50 basis points (bps) interest rate hike by the Fed in March’s monetary policy committee (MPC) is holding the investor’s nerves.

Adding to the headlines of geopolitical issues, the market participants are eyeing the monthly US Consumer Confidence and PMI Composite Reports on Manufacturing and Services, both will be released on Tuesday. While the Swiss franc will be guided upon the release of Wednesday’s ZEW Survey Expectations by the Centre for European Economic Research.

CME Group’s flash data for crude oil futures markets noted open interest went down for the sixth session in a row on Friday, this time by nearly 16K contracts. On the other hand, volume increased by around 87.5K contracts, partially reversing the previous pullback.

WTI could slip back to sub-89.00 levels

Friday’s small downtick in prices of the WTI was on the back of shrinking open interest, allowing for the re-emergence of some weakness in the very near term. Against this, further correction could drag prices to, initially, the $88.80 region, where recent lows and a Fibo level (of the December-February rally) coincide.

One-month risk reversal (RR) of silver (XAG/USD) jumped the most since September 2021, on weekly basis, by the end of Friday’s North American session, per the options market data on Reuters.

That said, the RR print flashed 1.175 figure for the latest weekly count, the highest since the week ended on September 03, 2021.

Silver’s price performance also justifies the options market’s optimism as the bright metal rose during the last three consecutive weeks, before easing from a monthly high, down 0.71% intraday near $23.75 at the latest.

It’s worth noting that the latest risk-on mood weighs on the XAG/USD prices of late. However, cautious sentiment and softer USD keep metal buyers hopeful.

Read: Silver Price Analysis: XAG/USD seesaws near $24.00 inside monthly rising wedge

Here is what you need to know on Monday, February 21:

Escalating geopolitical tensions over the weekend with Russia and Belarus extending military drills in the eastern part of Ukraine caused markets to start the week on a cautious note. News of US President Joe Biden accepting to meet his Russian counterpart Vladimir Putin, however, provided relief and allowed risk flows to return. US markets will be closed in observance of Presidents Day on Monday. IHS Markit will publish the preliminary February Manufacturing and Services PMI reports for Germany, the euro area and the UK. Market participants will keep a close eye on headlines surrounding the Russia-Ukraine crisis as well. 

The White House confirmed that US President Biden will meet with Russian President Putin at the G7 summit on Thursday so long there is no invasion of Ukraine. This development seems to have revived optimism that the Russia-Ukraine conflict could be resolved through diplomacy.

Nevertheless, European Commission President Ursula von der Leyen announced on Sunday that Russia will be cut off from international financial markets and will be denied access to major export goods if it were to invade Ukraine. “The move to sanctions is so enormous and consequential that we know we must always give Russia a chance to return to diplomacy and the negotiating table,” von der Leyen added. Similarly, Reuters reported that the Biden administration prepared an initial package of sanctions against Russia that would bar US banks from processing transactions with Russian banks.

The US Dollar Index, which started the new week above 96.00, stays in the negative territory around 95.80, reflecting the negative impact of the improving market mood on the currency.

EUR/USD opened with a small bearish gap and edged lower toward 1.1300 before regaining its traction. The pair was last seen moving in a tight range above 1.1350.

GBP/USD clings to modest daily gains above 1.3600 heading into the European session. 

Gold registered impressive gains and climbed to multi-month highs above $1,900 last week with the precious metal finding demand as a safe-haven asset. XAU/USD has met heavy bearish pressure early Monday and retreated to the $1,890 area.

USD/JPY continues to move sideways near 115.00 despite the selling pressure surrounding the greenback. The JPY is finding it difficult to find demand in the risk-positive market environment.

Bitcoin fell sharply and touched its lowest level in more than two weeks at $38,000. BTC/USD is staging a rebound early Monday but stays below $40,000. Ethereum closed the previous five trading days in the negative territory and fell below $2,600 for the first time since early February on Sunday. ETH/USD is up more than 4% on Monday, trading above $2,700.

In opinion of FX Strategists at UOB Group, the likeliness of GBP/USD advancing beyond 1.3645 in the near term could be losing momentum.

Key Quotes

24-hour view: “Last Friday, we highlighted that ‘the overbought advance in GBP has scope to extend above 1.3645 but the next major resistance at 1.3680 is likely out of reach’. The subsequent advance fell short of our expectations as GBP rose to 1.3640 before staging a surprising sharp pullback to 1.3575. Upward pressure has dissipated and GBP is likely to consolidate and trade between 1.3560 and 1.3630 for today.”

Next 1-3 weeks: “Our latest narrative was from last Thursday (17 Feb, spot at 1.3585) where we highlighted that upward momentum is building but GBP has to close above 1.3645 before a sustained advance is likely. Last Friday (18 Feb), GBP rose to 1.3640 before pulling back sharply. The chance for GBP to move clearly above 1.3645 has diminished and a breach of 1.3545 (no change in ‘strong support level) would indicate that GBP is not ready to head above 1.3645.”

• USD/TRY pares CBRT-led gains as firmer sentiment weighs on USD.
• Biden-Putin summit, Blinken-Lavrov talks favor hopes of a diplomatic solution to the Ukraine-Russia tussles.
• Turkish opposition leader braces for victory over Erdogan in 2023 elections despite being unclear on candidature.
• CBRT kept benchmark rates unchanged at 14.00%, fuelled markets with repo actions.

USD/TRY struggles to keep the bounce off the intraday low, down 0.36% on a day around $13.61 ahead of Monday’s European session.

The Turkish lira (TRY) pair refreshed a five-week high early in the Asian session before taking a U-turn from $13.78.

While the pair’s initial up-moves could be linked to chatters surrounding the Turkish central bank’s (CBRT) latest inaction and political plays in Ankara, the pullback moves could be attributed to the market’s risk-on mood amid headlines concerning Russia-Ukraine tussles.

CBRT kept the benchmark rates unchanged at 14.0% in the last week but kept the markets liquid via repo auctions. The Turkish central bank also said, "Expecting disinflation process to start on the back of measures taken." Elsewhere, Reuters reports political challenges for the current President Recep Tayyip Erdogan. The news said, “A veteran Turkish political leader who has struggled for years to have President Tayyip Erdogan voted out of office says it is "very clear" that his dream is drawing nearer, even as doubts remain about whether he will be the main opposition candidate at presidential elections set for 2023.”

On a different page, risk appetite improved amid fresh chatters over a summit between US President Joe Biden and his Russian counterpart Vladimir Putin. Also weighing on the metal’s safe-haven demand is the scheduled meeting between US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov. However, headlines conveying the US preparedness to levy harsh sanctions on Russia, in case of Ukrainian invasion, keep the market optimists on the edge.

Other than the geopolitics, recently easy Fedspeak also weighs on the USD/TRY prices. That said, Chicago Fed President and FOMC member Charles Evans said on Friday that the current Fed policy had been "wrong-footed" in the face of high inflation, but may not need to become restrictive. On the other hand, New York Federal Reserve Bank President John Williams and the No. 2 official on the Fed’s policy-setting panel mentioned, "I don’t see any compelling argument to taking a big step at the beginning."

Amid these plays, the S&P 500 Futures reverse the early Asian loss of around 0.50% while the US Dollar Index (DXY) remains pressured around 95.80 by the press time.

Looking forward, the first readings of the US PMIs for February and Fedspeak will join the US Core PCE Price Index, the Fed’s preferred inflation reading, to decorate this week’s calendar. However, major attention will be given to risk catalysts for clear directions.

Technical analysis

Unless providing a daily close below the monthly support line and 21-DMA, around $13.55, USD/TRY buyers remain hopeful to challenge the yearly peak surrounding $13.95.

Open interest in gold futures markets rose for the third session in a row on Friday, this time by nearly 7K contracts according to advanced figures from CME Group. Volume, instead, resumed the downtrend and shrank by around 114.2K contracts.

Gold faces extra gains on a close above $1,900

Gold prices charted an inconclusive session on Friday amidst rising open interest, which should be supportive of some consolidation in the very near term. The drop in volume, in addition, could spark some corrective downside at the same time. The yellow metal is expected to extend the rally above $1,900 per ounce troy.

FX Strategists at UOB Group suggested EUR/USD could drop further and revisits 1.1280 in the next weeks.

Key Quotes

24-hour view: “We expected EUR to trade sideways between 1.1330 and 1.1395 last Friday. However, it dropped to 1.1313 before closing on a soft note at 1.1313 (-0.34%). Downward momentum is beginning to build and there is room for EUR to test the strong support at 1.1300. As the decline is approaching oversold levels, a sustained decline below 1.1300 is unlikely (next support is at 1.1280). Resistance is at 1.1350 followed by 1.1375.”

Next 1-3 weeks: “We have expected EUR to weaken for more than a week now. In our latest narrative from last Friday (18 Feb, spot at 1.1370), we highlighted that downward momentum has waned and odds for further EUR weakness have diminished. We added, ‘in order to rejuvenate the flagging momentum, EUR has to move and stay below 1.1310 within these 1 or 2 days’. EUR subsequently dropped to 1.1313 before closing on a soft note at 1.1321 (-0.34%). While 1.1310 was not breached, downward momentum is beginning to build again and EUR could head lower to 1.1280 (the next support is at 1.1240). Overall, in order to maintain the build-up in momentum, EUR has to stay below 1.1400 (no change in ‘strong resistance’ level from last Friday).”

• AUD/USD stays on the front foot around intraday high, stretches three-week rebound from yearly low.
• The bullish signal from moving average cross, upbeat RSI keeps buyers hopeful.
• Bears need validation from three-week-old support for fresh entries.

AUD/USD flirts with an intraday high of 0.7215 as bulls take a breather heading into Monday’s European session.

In doing so, the Aussie pair remains firmer inside a monthly symmetrical triangle following a three-week uptrend.

Also keeping the AUD/USD buyers hopeful is the near 60 level of the RSI and bull cross of 50-SMA over the 200-SMA.

That said, the quote currently heads to the stated chart pattern’s upper limit, surrounding 0.7230, a clear break of which will challenge the monthly high of 0.7250.

However, 0.7280 and January’s peak near 0.7315 could test the AUD/USD bulls afterward.

Meanwhile, pullback moves remain elusive beyond the stated SMA, around 0.7165-60 at the latest, a break of which will highlight the triangle’s support line, close to 0.7135, for AUD/USD sellers.

In a case where AUD/USD prices drop below 0.7135, the 0.7100 threshold and 0.7085 may entertain the bears before directing them to the monthly low near 0.7050.

AUD/USD: Four-hour chart

Trend: Further upside expected

• EUR/GBP has rebounded after forming lows around 0.8325.
• The cross holds above 20-EMA, which keeps buyers hopeful.
• The pair, however, trades in a falling wedge that risks downside.

The EUR/GBP pair has attracted significant bids after it tested Monday’s low at 0.8325. The shared currency has been underperforming against the pound since Wednesday after kissing the upper trendline of a falling wedge, which is placed from February 09 highs at 0.8450 on the hourly chart. The former has been a major barricade for the asset and is strictly restricting any upside in the asset.

EUR/GBP is trading in a falling wedge that signals downside but for now provides pullback towards the upper trendline followed by a significant downward move.

After getting buying interest from Monday’s low at 0.8325, the EUR/GBP pair has pierced the 20-period Exponential Moving Average (EMA), which is trading near 0.8339. The asset is holding above the 20-EMA, eyeing 0.8350 on the upside, followed by 0.8366.

The Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which is hinting at consolidation. However, the RSI has breached the trendline placed from 70.00 on Tuesday, which adds to the upside filters.

On the flip side, the view may negate if EUR/GBP slips below 0.8320 decisively. The weakness may drag the asset to January 31 lows at 0.8305 and February 03 lows at 0.8285.

EUR/GBP hourly chart

• Asia-Pacific equities drift lower as China, India and Japan lead bears.
• Aussie PMIs came in firmer, Jibun Bank Manufacturing PMI eases in February.
• Biden-Putin summit favors US stock futures to reverse early Asian session losses, Treasury yields remain pressured amid US holiday.
• PBOC keeps rates unchanged, China’s fresh regulations weigh on equities.

Markets in Asia fail to portray a broad risk-on mood amid mixed feelings at home. While portraying the mood, MSCI’s index of Asia-Pacific shares outside Japan drops 0.66% whereas Japan’s Nikkei 225 also prints 0.80% daily losses heading into Monday’s European session.

Equities in Japan bear the burden of geopolitical fears concerning Ukraine and North Korea as the latest improvements over Moscow-Kyiv tussles remain elusive. Also, softer prints of Japan’s Jibun Bank Manufacturing PMI for February, to 52.9 from 55.4 prior, add to the downside pressure on the Nikkei 225.

Further, news that China’s Tongcheng Travel Holdings and Evergrande Property Services Group will be removed from Hang Seng Tech Index and Hang Seng China Enterprises Index respectively weighed on equities from Beijing. The news pours cold water on China’s efforts to keep the economy fluid. Recently, the People’s Bank of China’s (PBOC) kept the benchmark Loan Prime Rate (LPR) of 3.7% unchanged.

Elsewhere, stocks in India were softer, with the BSE Sensex down 0.90% intraday at the latest, as markets brace for hawkish Reserve Bank of India (RBI) after the latest inaction by the Indian central bank.

Alternatively, equities from Australia and New Zealand remain firmer as policymakers ease virus-led border controls while the chatters surrounding the Biden-Putin summit also favor broad risk-on mood. That said, Indonesia’s IDX Composite Prints mild gains but South Korea’s KOSPI remains mildly offered at the latest as traders struggle for clear direction.

On a broader front, the Presidents’ Day holiday in the US financial markets restrict Treasury yields’ performance but stock futures reverse early Asian gains on hopes of Ukraine diplomacy.

Read: US Treasury yields, S&P 500 Futures pare intraday losses as Biden-Putin summit eyed

• USD/INR remains on the back foot near the monthly low after posting the heaviest weekly fall since late December.
• News of Biden-Putin summit joins Blinken-Lavrov talks to underpin hopes of Ukraine diplomacy and drags USD.
• India’s daily covid infections drop to December 30 levels, bond selling by foreign investors slows down after MPC.
• Preliminary PMIs for February, US PCE Inflation data will decorate weekly calendar, Russia-Ukraine developments are the key.

USD/INR refreshes intraday low to 74.53, down 0.15% on a day during early Monday morning in Europe.

The cross-currency pair printed the biggest weekly fall by the end of Friday amid broad US dollar weakness. The recent declines targeting the monthly low mainly cheer the market’s risk-on mood backed by hopes of Ukraine diplomacy. Also supporting the pair sellers is the improving covid conditions in India, as well as the recently softer pace of the Indian bond selling by the foreign investors.

US Dollar Index (DXY) snaps two-day rebound with 0.26% intraday losses, around 95.85 by the press time, as the market’s optimism concerning the Ukraine-Russia issue weighs on the greenback. Also challenging the USD were the recently downbeat comments from the Fed policymakers.

With US President Joe Biden agreeing for a summit over Ukraine and including Russian counterpart Vladimir Putin, global traders got another reason to expect a soon diplomatic easing of Russia-Ukraine tensions. During the last week, US Secretary of State Antony Blinken agreed to talk with Russian Foreign Minister Sergei Lavrov and raised the hope of a solution to the key market problem on hand.

Elsewhere, Chicago Fed President and FOMC member Charles Evans said on Friday that the current Fed policy had been "wrong-footed" in the face of high inflation, but may not need to become restrictive. On the other hand, New York Federal Reserve Bank President John Williams and the No. 2 official on the Fed’s policy-setting panel mentioned, "I don’t see any compelling argument to taking a big step at the beginning."

At home, India reported 16,051 daily covid cases on early Monday, the lowest since December 30. Also favoring the Indian rupee (INR) buyers is the update from NewsRise that quotes an anonymous trader with a foreign bank saying, “There was heightened negativity for a few sessions following the budget announcement, which led to outflows from government bonds, especially the trading money. However, after the policy things seem to be consolidating.”

Against this backdrop, stock futures remain firmer and the US Treasury yields keep the previous week’s pullback from a 2.5-year high.

Looking forward, preliminary readings of February month’s PMI figures will join the Fedspeak and Core PCE Price Index, the Fed’s preferred inflation reading, to decorate the calendar. However, risk catalysts will be more important for clear directions.

Technical analysis

A clear downside break of a five-week-old ascending trend line joins the impending bear cross to keep the USD/INR sellers hopeful. However, the 200-DMA level of 74.35 becomes crucial support to watch during the quote’s further decline.

• WTI slips near $90 on Biden-Putin meet as investors hope for a truce between Russia and Ukraine.
• The DXY scales below 96.00 as the risk-on impulse kicks in.
• The API weekly crude stockpiles remain the next trigger to keep on the radar.

West Texas Intermediate (WTI), futures on NYMEX, retreats from Monday’s high of $91.60 in the Asian session after the US White House confirms that US President Joe Biden has accepted to meet Russian leader Vladimir Putin on security and strategic stability in Europe. The confirmation of the meeting has come along with a condition stating that Russia doesn’t invade Ukraine.

Should this occur, the crude oil supply will not worsen further as Russia will not find any sanctions from the Western leaders.

Earlier, the market participants claimed that restrictions on the exports from Russia may reduce the supply of oil and increase the price eventually. The economy is already encountering a tight oil supply environment and any further slippage in total oil stocks could halt the operating activities.

The announcement has eased the volatility in the market principally and risk-on impulse is getting more traction. The US dollar index (DXY) tumbles below 96.00, 0.3% lower than Friday’s closing price.

Apart from that, Saudi Energy Minister Prince Abdulaziz bin Salman said at an energy conference in Riyadh Sunday, OPEC and its allies (OPEC+) should come across to keep oil market stability in the long term. The comments have been supportive of the oil supply but the Russia-Ukraine tussle still remains the major driver to guide the crude oil prices.

As the US markets are closed on Monday, on account of President’s Day, the release of American Petroleum Institute (API) weekly oil stockpiles shifts on Wednesday, which may help investors for further guidance over the anticipation of the oil prices in coming trading sessions.

• USD/JPY holds onto previous week’s losses, stays pressured around intraday low of late.
• MACD conditions signal slow grind to the north but 50-SMA, weekly resistance line challenge buyers.
• Monthly support line restricts immediate downside, Fibonacci retracements add to the trading filters.

USD/JPY struggles to regain 115.00, down 0.13% intraday near 114.95 by the press time, despite the recent risk-on mood during Monday’s Asian session.

In doing so, the yen pair extends pullback from the 38.2% Fibonacci retracement (Fibo.) of January-February upside and the 100-SMA.

However, an upward sloping trend line from February 02, close to 114.80 at the latest, restricts the quote’s immediate declines.

Following that, the 50% and 61.8% Fibo. levels, respectively around 114.90 and 114.55, will challenge the USD/JPY bears before directing them to the monthly low of 114.15.

On the flip side, the aforementioned SMA and Fibonacci retracement confluence near 115.25 precede the previous support line from late January, around 115.40, challenges the short-term USD/JPY buyers.

However, a convergence of 50-SMA and a descending trend line from February 10, close to 115.45, will be a tough nut to crack for the bulls.

It’s worth mentioning that the MACD conditions have recently favored the bulls but confirmation is necessary.

USD/JPY: Four-hour chart

Trend: Further declines expected

• GBP/USD riding the risk-on waves on prospects of diplomacy over an invasion of Ukraine. 
• Fed and BoE speakers are scheduled for the week ahead.

GBP/USD is higher at the start of the week, penetrating into the 1.36 area after moving up from a low of 1.3583 to test the 1.3620 highs. 

Sterling was firming for a third consecutive week on Friday. It was helped by better-than-expected UK Retail Sales numbers, expectations of rate hikes from the Bank of England and now, at the start of the week, risk-on headlines related to Russia/Ukraine.

Sales volumes in the UK in January rose 1.9%, surpassing forecasts of a 1.2% rise, as consumers began to return to more normal buying behaviours after a 4% drop in December 2021. The data helped the pound on the basis that the Bank of England would be expected to hike rates in March following additional data published last week showing inflation rising to a nearly 30-year high. Money markets are expecting a rate hike next month and have priced in as much as 136 bps of rate increases for the remainder of the year.

Meanwhile, for Monday, risk sentiment has improved on news that Biden and Putin have accepted "the principle" of a summit over Ukraine.  The caveat to such a meeting is that it will only take place so long that there is no invasion of Ukraine. No date has been confirmed with Putin so far, the White House spokesman said.

Biden stepped up his warnings about Moscow’s plans on the weekend after seeing evidence that an attack on Ukraine was imminent. Satellite images show a new phase of Russian military readiness and the US has intelligence that the Kremlin ordered an invasion prompted the latest Biden warning, officials say. Also, the US is prepared to impose swift and severe consequences if Russia invades, adding that Russia appears to continue preparations for a full-scale assault on Ukraine very soon.

All eyes on central bank speakers 

For the week ahead, there will be both BoE and Fed speakers. ''With 6 speakers scheduled, the MPC will have plenty of opportunities to push back on aggressive market pricing ahead of its March meeting,'' analysts at TD Securities explained.

''While markets are betting on a 50bps hike, we think the MPC is more likely to stick to 25bps increments. Wed is TSC, and Thurs/Fri sees 3 MPC members speak at the BoE's "Unwinding QE" conference, which could provide early hints on QT plans.''

Analysts at Westpac have the lineup for Fed speakers as follows:

''Chicago Fed President Evans (dove) and Governor Waller (hawk) will take part in a policy panel concerning the Fed’s new policy strategy. Cleveland Fed President Mester (moderate hawk) and New York Fed President Williams (centrist) will both discuss the economic outlook at different events. Governor Brainard (nominee for Fed Vice Chair) will speak on central bank digital currencies.''

These speakers will be important considering the convergence that is being priced in now to the markets between the central banks and the Fed. This has had an effect on US dollar positioning. 

Speculators' net long bets on the US dollar fell in the latest week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

''The value of the net long dollar position was $6.76 billion for the week ended Feb. 15, the lowest since August. Last week, speculators' net long position stood at $7.81 billion,'' Reuters reported. ''The dollar which rose 6.3% against a basket of currencies (DXY) in 2021, has struggled to extend its gains this year, as investors fret that much of the good news that had driven the rally in the US currency is already priced in.''

• EUR/USD refreshes intraday high to portray the first positive daily performance in three.
• Market sentiment improves on Biden-Putin summit news, Blinken-Lavrov on the cards as well.
• Hawkish ECB rhetoric contrasts recently easy Fedspeak to underpin further upside of the pair.
• Preliminary PMIs for February, Fedspeak decorates calendar but risk catalysts are more important for near-term directions.

EUR/USD takes the bids to renew intraday high near 1.1365, up 0.35% intraday as it snaps two-day downtrend during the late Asian session on Monday. The major currency pair not only dropped during the last two days but also portrayed a fortnight-long south-run before the latest recovery, mainly due to the improvement in the risk appetite.

Global markets began the trading week on a back foot as weekend news marked an explosion was heard in the center of the rebel-held city of Donetsk in eastern Ukraine. However, the sentiment quickly improved after AFP quoted French President Emanuel Macron who proposed a summit including US President Joe Biden and his Russian counterpart Vladimir Putin. The news also mentioned that both the parties have accepted the “principle” of a summit. Following the news, the White House said, “President Biden accepted in principle a meeting with President Putin following that engagement, again, if an invasion hasn’t happened.”

While portraying the risk-on mood, the S&P 500 Futures reverse the early Asian loss of around 0.50% while the US Dollar Index (DXY) remains pressured around 95.80 by the press time.

In addition to the firmer sentiment, recently softer Fedspeak also weighs on the USD and helps the EUR/USD to consolidate the latest losses. That said, Federal Reserve Bank of Chicago President and FOMC member Charles Evans said on Friday that the current Fed policy had been "wrong-footed" in the face of high inflation, but may not need to become restrictive. On the other hand, New York Federal Reserve Bank President John Williams and the No. 2 official on the Fed’s policy-setting panel mentioned, "I don’t see any compelling argument to taking a big step at the beginning."

On the same line, Bloomberg quoted European Central Bank (ECB) sources to mention, “Policymakers are edging towards a rate hike before the end of 2022 to stem more persistent than expected inflationary pressures and a stronger inflation outlook.”

Looking forward, EUR/USD traders will pay close attention to the Russia-Ukraine developments as the Biden-Putin summit may de-escalate market fears of a war between Moscow and Kyiv. The meeting between US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov is also important for fresh impulse.

On an intraday basis, preliminary readings of February month’s PMI figures for Germany, the Eurozone and the US will be crucial. Also important will be a speech from Fed Governor Michelle W. "Miki" Bowman".

Technical analysis

Although steady RSI suggests short-term EUR/USD grind between the 100-DMA and 12-day-old support, respectively around 1.1425 and 1.1290, recently bearish MACD signals keep sellers hopeful.

US President Joe Biden’s administration has prepared an initial package of sanctions against Russia that would bar the US banks from processing transactions with big Russian banks, Reuters reports, citing three people familiar with the matter.

Biden plan would cut "correspondent" banking relationships between targeted Russian banks and US banks, the sources said.

Sources were further cited, as saying that “the US will also wield its most powerful sanctioning tool against certain Russian individuals and companies by placing them on the Specially Designated Nationals (SDN) list, effectively kicking them out of the US banking system, banning their trade with Americans and freezing their US assets.”

The sources added that these measures would only be implemented if Russia invades Ukraine

Market reaction

The risk-on market mood remains unfazed by the above headlines, as investors remain hopeful ahead of the proposed Biden-Putin Summit.

The safe-haven US dollar suffers from the risk-on wave while the S&P 500 futures add 0.50% on the day. Gold price consolidates its correction from an eight-month top of $1,908.

• USD/CAD is under pressure again as markets move into consolidation. 
• Oil prices and Fed speakers in focus as markets wait in anticipation of a US/Russia summit. 

USD/CAD is back to trading flat in the Asian start to the week ahead of holiday markets in the US and following some initial jitters over the Russian and Ukraine risks. At the time of writing, USD/CAD is oscillating near 1.2737 after travelling between 1.2731 and 1.2760. 

The risk-averse mood in markets persisted Friday, Ukraine and Federal Reserve tightening remaining the main concerns. For CAD, in particular, there has been a focus also on the price of oil and inflation. Weighing on the loonie, crude oil recorded its first weekly loss amid renewed concerns of Iranian oil hitting the market. This offset the risks of disruption to Russia’s oil supply if it invades Ukraine.

Over the weekend, the US ramped up warnings of a possible attack, however,  Russia reiterated no invasion was underway and French President Emmanuel Macron was reported saying that there was the possibility of a summit between US president Joe Biden and Russia's president, Vladimir Putin. This was later confirmed by the White House, albeit warning at the same time that the US believes an invasion is imminent and that there can be no summit if Russia were to invade. Meanwhile, the US Secretary of State Antony Blinken and Russia’s Foreign Minister Sergey Lavrov have also agreed to meet for talks this week.

Will sanctions hit Russian oil?

Whilst there is plenty of uncertainty about what Russia may do, there is even more uncertainty over how the West may respond. The US is prepared to impose swift and severe consequences if Russia invades and it will retaliate with sanctions and the oil markets is anxious that these could impact Russian crude oil exports. Given that Russia is the second-largest crude oil exporter, the Canadian dollar would stand to gain on higher oil prices.

All eyes on the Fedspeak

Meanwhile, it will be all ears to the ground this week for Fed speakers. Analysts at Westpac have the lineup: ''Chicago Fed President Evans (dove) and Governor Waller (hawk) will take part in a policy panel concerning the Fed’s new policy strategy. Cleveland Fed President Mester (moderate hawk) and New York Fed President Williams (centrist) will both discuss the economic outlook at different events. Governor Brainard (nominee for Fed Vice Chair) will speak on central bank digital currencies.''

Saudi Energy Minister Prince Abdulaziz bin Salman said at an energy conference in Riyadh Sunday, OPEC and its allies (OPEC+) must work together to maintain oil market stability in the long term.

Key quotes

“We need to keep this consensus-building approach to be with us permanently because without it we will lose sight of our collective ambition.”

“Ask any producer of oil and gas today, if it were not for OPEC+ would they be the chairmen and the CEOs of today? And the answer: they would have vanished.”

At the same event, Iraq Oil Minister Ihsan Abdul Jabbar said, “for the benefit of the whole energy market, OPEC+ should sustain the current agreement and any dramatic change could cause an imbalance.”

Read: WTI remains firmer above $91.00 amid Russia-Ukraine jitters

European Commission President Ursula von der Leyen warned Sunday, Russia would be cut off from international financial markets and denied access to major export goods if it invaded Ukraine, per German public broadcaster ARD.

Key quotes

"Russia would in principle be cut off from the international financial markets," 

sanctions would be imposed on "all goods we make that Russia urgently needs to modernize and diversify its economy, where we are globally dominant and they have no replacement."

"The move to sanctions is so enormous and consequential that we know we must always give Russia a chance to return to diplomacy and the negotiating table.”

"This window is still open."

• DXY snaps two-day uptrend, takes offers to refresh intraday low.
• 100-SMA adds to the upside filters, 50-SMA restricts immediate downside.
• RSI, MACD suggest continuation of sideways grind inside a symmetrical triangle.

US Dollar Index (DXY) remains on the back foot around 95.88, down 0.23% intraday while snapping a two-day uptrend during Monday’s Asian session.

In doing so, the greenback gauge takes a U-turn from a descending resistance line from January 28, as well as 100-SMA.

However, 50-SMA and a five-week-long rising trend line, respectively around 95.85 and 95.50, will challenge the short-term DXY downside.

It should be observed that a symmetrical triangle formation established since mid-January joins almost steady RSI and sluggish MACD signals to hint at the further sidelined performance of the US Dollar Index.

That said, the quote’s weakness past 95.50 will aim for the monthly low of 95.13 and the 95.00 threshold.

On the contrary, the 96.05 level comprising 50-SMA and the aforementioned resistance line challenge the immediate upside of the DXY.

Following that, the monthly high of 96.71 and the 97.00 round figure may test US Dollar Index bulls before directing them to January’s peak of 97.44.

Overall, DXY is likely to remain sidelined inside the symmetrical triangle even if the latest pullback can please intraday bears.

DXY: Four-hour chart

Trend: Further weakness expected

• Gold is caught between risk-on and risk-off headlines. 
• US/Russian summit road map is weighing on gold. 
• Gold shines as the go-to safe-haven asset

The price of gold has been toing and froing around each and every headline around Russia, Ukraine and the latest attempts to avert war through diplomacy. At the time of writing, gold is around flat near $1,896 but has travelled between a high of $1,908.32 and a low of $1,891.68 so far. 

The headlines are rolling in, but the consensus in markets is that there will be a US/Russian summit that could help to defuse the situation around Ukraine. This has been confirmed by the White House, but the caveat is that there cannot be an invasion of Ukraine and the US is of the mind that one is imminent. The US announced that Russia appears to continue preparations for a full-scale assault on Ukraine very soon.

Meanwhile, US Secretary of State Antony Blinken agreed to meet Russian Foreign Minister Sergei Lavrov next week, calming investor nerves and slowing demand for safe-havens. The White House said US President Joe Biden will give an update on the Russia-Ukraine situation at 4 p.m. ET on Friday.

The price of gold could soon fall back into the determining hands of the hawks as the focus switches over to monetary policy at the Federal Reserve. In this regard, for the week ahead ears will be to the ground for Fed speakers. ''Most focus will be centred on Governor Waller, who will be discussing the U.S. economic outlook on 24 February,'' analysts at TD Securities said. ''Presidents Bostic, Barkin and Mester are also scheduled to deliver remarks.''

Gold technical analysis

Markets are jittery on the headlines with gold falling into the 4-hour consolidation area, as forecasted as follows: 

''The 4-hour chart shows that the price is poised for a possible break to the downside considering the deceleration of the correction. A break of $1,890 could be on the cards for the opening sessions to open the way to the daily chart's 38.2% Fibo near $1,880.''

In the live 4-hour chart above, the price is near resistance and unable to close above it. Should consecutive failures occur n the upside, then the bears will be looking for a test of the prior lows with the support area near $1,890 a firm target to break.

• AUD/USD renews intraday high, extends three-week uptrend amid fresh risk-on mood.
• Hopes of de-escalation over Ukraine-Russia fears gain momentum on chatters concerning Biden-Putin summit.
• Recently cautious Fedspeak, upbeat Aussie PMI adds to the bullish bias.
• Qualitative catalysts will have more importance, Wednesday’s Aussie Wage Price Index eyed too.

AUD/USD takes the bids to refresh intraday high around 0.7200 while extending the previous three-week run-up during Monday’s Asian session.

The risk-barometer pair recently gained upside momentum amid positive headlines concerning the Russia-Ukraine issue. Also favoring the bulls is the People’s Bank of China’s (PBOC) inaction and upbeat prints of the Commonwealth Bank of Australia’s (CBA) February month PMI.

AFP recently quoted French President Emanuel Macron who proposed a summit including US President Joe Biden and his Russian counterpart Vladimir Putin. The news also mentioned that both the parties have accepted the “principle” of a summit. Following the news, the White House said, “President Biden accepted in principle a meeting with President Putin following that engagement, again, if an invasion hasn’t happened.”

The news helped S&P 500 Futures to quickly reverse early Asian session losses while also dragging gold prices from the fresh eight-month high, marked before a few minutes.

It’s worth noting that the PBOC offered no surprise following its latest monetary policy meeting, keeping the benchmark Loan Prime Rate (LPR) of 3.7% unchanged. Further, higher than expected and prior readings of CBA Manufacturing and Services PMIs also underpin AUD/USD upside.

Additionally, the recently softer Fedspeak also weighs on the US Treasury yields and the US dollar, which in turn help AUD/USD buyers. That said, Federal Reserve Bank of Chicago President and FOMC member Charles Evans said on Friday that the current Fed policy had been "wrong-footed" in the face of high inflation, but may not need to become restrictive. On the other hand, New York Federal Reserve Bank President John Williams and the No. 2 official on the Fed’s policy-setting panel mentioned, "I don’t see any compelling argument to taking a big step at the beginning."

To sum up, risk-on mood recently helped AUD/USD prices but the upcoming meetings/summits will be crucial for the near-term direction of the pair. Also important will be Wednesday’s Q4 Wage Price Index for Australia as the Reserve Bank of Australia (RBA) keeps refraining from hawkish comments.

Technical analysis

A sustained bounce off the 50-DMA, near 0.7170 by the press time, directs AUD/USD bulls towards the 100-DMA level surrounding 0.7245.

• NZD/USD has rebounded from 0.6680 as uncertainty vanished on Biden and Putin summit.
• Biden and Putin are likely to discuss security and strategic stability in Europe.
• The PBOC has kept Loan Prime Rate unchanged at 3.7%.

The NZD/USD pair has rebounded after hitting the lows of 0.6680 on Monday, as the market sentiment turns positive after US President Joe Biden and Russian leader Vladimir Putin have agreed to the idea of a summit to discuss “to discuss security and strategic stability in Europe”, as per The Guardian. The agreement of the summit has come with a stipulation that it will be held if Russia doesn’t invade Ukraine. White House has confirmed the summit between the two leaders. 

The positive development over the ongoing Russia-Ukraine tussle has eased the ultra-hot volatility in the market. The Asian markets are rebounding and risk-sensitive currencies are gaining limelight after the announcement.

Meanwhile, the People’ Bank of China (PBOC) has kept the interest rate unchanged at 3.7%, which is in line with the estimates. This has underpinned the kiwi against the greenback.

The coincidence of easing Russia-Ukraine tensions and the status quo maintained by the PBOC has infused fresh blood in the kiwi.

On the other side, the US dollar index (DXY) has eased after testing Friday’s high at 96.15. The momentum of weakness signifies that a significant build-up of offers has been created amidst the risk-friendly market profile, which may push the DXY further below the psychological figure of 96.00.

US president Joe Biden will participate in the G7 meeting this Thursday, the White House confirms, and also that 
the president will meet with Russian President Vladimir Putin, in principle, so long that there is no invasion of Ukraine. No date has been confirmed with Putin so far, the White House spokesman said.

The official also said, however, that the US is prepared to impose swift and severe consequences if Russia invades, adding that Russia appears to continue preparations for a full-scale assault on Ukraine very soon.

Gold falls under pressure

Markets are jittery on the headlines with gold falling into the 4-hour consolidation area, as forecasted as follows: 

''The 4-hour chart shows that the price is poised for a possible break to the downside considering the deceleration of the correction. A break of $1,890 could be on the cards for the opening sessions to open the way to the daily chart's 38.2% Fibo near $1,880.''

In the live 4-hour chart above, the price is struggling to get and stay above the resistance and is now bleeding out towards prior lows with the support area near $1,890 pulling it in. 

• AUD/JPY renews intraday high amid fresh optimism over Ukraine-Russia.
• Chatters over Biden-Putin summit favored market sentiment of late.
• The latest Fedspeak refrains from stronger monetary policy adjustments, weighed on the US Treasury yields, DXY.
• PBOC leaves benchmark rate unchanged, Aussie/Japan PMIs came in mixed.

AUD/JPY grinds higher around intraday top close to 82.75 amid the market’s fresh risk-on mood during Monday’s Asian session. In doing so, the cross-currency pair rises 0.11% intraday while printing the first daily gains in three.

Behind the moves are the latest headlines from AFP that quoted French President Emanuel Macron who proposed a summit of US President Joe Biden and his Russian counterpart Vladimir Putin. The news also mentioned that both the parties have accepted the “principle” of a summit. Following the news, the White House said, “President Biden accepted in principle a meeting with President Putin following that engagement, again, if an invasion hasn’t happened.”

It’s worth noting that, a Reuters earlier mentioned an explosion was heard in the center of the rebel-held city of Donetsk in eastern Ukraine, which in turn kept market sentiment sour at the week’s start. That said, the US continues to suggest an imminent Russian military attack on Ukraine even as Moscow rejects the claims. Also, a diplomatic meeting between US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov is the ray of hope to witness de-escalation of the geopolitical fears.

Elsewhere, Federal Reserve Bank of Chicago President and FOMC member Charles Evans said on Friday that the current Fed policy had been "wrong-footed" in the face of high inflation, but may not need to become restrictive. On the other hand, New York Federal Reserve Bank President John Williams and the No. 2 official on the Fed’s policy-setting panel mentioned, "I don’t see any compelling argument to taking a big step at the beginning."

It should be noted that the People’s Bank of China (PBOC) kept its benchmark rate unchanged at 3.7% in the latest monetary policy meeting and offered no surprises to AUD/JPY. Also important was the upbeat Aussie PMIs for February from the Commonwealth Bank of Australia (CBA) versus Japan’s softer Jibun Bank Manufacturing PMI for the said month.

Amid these plays, US Treasury yields remain pressured and the stock futures print mild gains of late.

Moving on, risk catalysts are the key for short-term AUD/JPY moves.

Technical analysis

Unless declining back below a convergence of the 21-DMA and an ascending trend line from January 28, around 82.00, AUD/JPY bulls remain hopeful.

The People's Bank of China left their 5-year loan prime rate unchanged at 4.60%, as expected and the 1-year loan prime rate unchanged at 3.70%, as expected.

The central bank also sets the yuan mid-point at 6.3401 vs the last close of 6.3257.

About the fix

China maintains strict control of the yuan’s rate on the mainland.

The onshore yuan (CNY) differs from the offshore one (CNH) in trading restrictions, this last one is not as tightly controlled.

Each morning, the People’s Bank of China (PBOC) sets a so-called daily midpoint fix, based on the yuan’s previous day closing level and quotations taken from the inter-bank dealer.

• Market sentiment improves as Russia-Ukraine headlines flash positives, inflation woes keep buyers in check.
• Fed policymakers recently stepped back from strong rate hikes.
• US warns over imminent Ukraine invasion by Moscow as Russia and Belarus extend military drills, Putin-Biden summit chattered of late.
• Treasury yields remain pressured after snapping three-week uptrend, stock futures track Wall Street losses amid sluggish week-start.

Although markets are far from optimistic, headlines from France recently improved risk appetite during a sluggish Asian session on Monday.

While portraying the mood, the US 10-year Treasury yields stay depressed around 1.92% whereas the S&P 500 Futures reverse early Asian session losses to +0.05% while taking rounds to 4,340-45 of late.

Having witnessed a downbeat start to the week, market sentiment improves on headlines from AFP suggesting that French President Emanuel Macron proposed a summit of US President Joe Biden and his Russian counterpart Vladimir Putin. The news also mentioned that both the parties have accepted the “principle” of a summit.

However, CNN news questions the market’s optimism by saying, “The White House has not confirmed the prospect of Biden/Putin summit.”

It’s worth noting that, a Reuters’ witness earlier mentioned that an explosion was heard in the center of the rebel-held city of Donetsk in eastern Ukraine. That said, the US continues to suggest an imminent Russian military attack on Ukraine even as Moscow rejects the claims. Even so, a diplomatic meeting between US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov is the ray of hope to witness de-escalation of the geopolitical fears.

Elsewhere, Federal Reserve Bank of Chicago President and FOMC member Charles Evans said on Friday that the current Fed policy had been "wrong-footed" in the face of high inflation, but may not need to become restrictive. On the other hand, New York Federal Reserve Bank President John Williams and the No. 2 official on the Fed’s policy-setting panel mentioned, "I don’t see any compelling argument to taking a big step at the beginning."

Although the yields fail to justify risk-off mood, maybe due to hopes of softer Fed rate hikes, the gold prices manage to cheer the rush to risk-safety and renew an eight-month high above $1,900 at the latest.

Looking forward, US Core PCE inflation data and updates over Russia-Ukraine will be crucial for market sentiment.

Read: US inflation expectations drop to two-week low, focus on Core PCE Price Index

CNN has stated that the White House has not confirmed the prospect of US presidential Joe Biden and Russian Vladamir Putin summit, despite markets catching a bid on rumours of such an agreement between the two leaders. 

There is news, however, that Biden and Putin have accepted "the principle" of a summit over Ukraine, according to the French president, a statement from the French president Emmanuel Macron.

Meanwhile, Biden stepped up his warnings about Moscow’s plans on the weekend after seeing evidence that an attack on Ukraine was imminent.

Satellite images show a new phase of Russian military readiness and the US has intelligence that the Kremlin ordered an invasion prompted the latest Biden warning, officials say.

USD/JPY popped 20 pips on the prospects of a summit and is firming in the 115 area.

• EUR/USD is eyeing 1.1280 for ground as investors shift to defensives amid the risk-off impulse.
• The invasion of Russia on Ukraine may attract sanctions from the EU at the earliest.
• Europe’s PMI Composite Reports will provide for fresh impetus on the interest rate.

EUR/USD has pared its opening hour gains after the announcement from the Belarusian defence ministry that Russia will extend military drills in Belarus that were due to end on Sunday.

Meanwhile, European Commission President Ursula von der Leyen said Russia would be cut off from international financial markets and denied access to major exports needed to modernize its economy if it invaded Ukraine, as per Reuters. Should this occur, the supply chain may get disrupted and the economy could face a vulnerable phase.

Earlier, the European Council President Charles Michael announced that the European Union (EU) is prepared to impose sanctions on the Kremlin knowing that the verdict could dampen its own economy. This has raised bets over a potential invasion of Russia on Ukraine and, consequently, investors are avoiding risk-sensitive currencies.

The US dollar index (DXY) is trading flat in the Asian session, eyeing cues from Asian markets, which are trading subdued ahead of the interest rate decision from the People’s Bank of China.

Apart from the headlines of the Russia-Ukraine tensions, Europe’s PMI monthly Composite Reports on Manufacturing and Services by Markit Economics on Monday holds significant importance. Europe’s PMI monthly composite is likely to land at 52.7 as per the market forecasts, higher than the previous figure of 52.3.

• GBP/JPY stays pressured around the key supports after snapping three-week uptrend.
• Descending RSI line, rising wedge confirmation keep sellers hopeful.
• 100-SMA, monthly support line restricts immediate downside, bulls need to cross 157.35 to retake controls.

GBP/JPY remains depressed around 156.20, down 0.20% intraday, during Monday’s Asian session.

The cross-currency pair printed the first negative weekly closing in four weeks by the end of Friday’s North American session while confirming a one-week-old rising wedge bearish chart pattern.

Also acting as a bearish catalyst is the downward sloping RSI line, not oversold.

However, a convergence of the 100-SMA and an upward sloping trend line from January 24, near 156.00 restricts the quote’s immediate downside.

Should the quote drop below 156.00, the 200-SMA level of 155.80 and the recent swing low around 155.30 may act as intermediate halts during the south-run towards January’s bottom of 152.90.

Meanwhile, recovery moves may initially challenge the stated rising wedge’s support line, around 156.50 by the press time.

However, the 157.00 round figure and the upper line of the stated bearish formation, close to 157.35, will test GBP/JPY buyers afterward.

That said, the pair’s upside past 157.35 won’t hesitate to refresh the 2022 peak, currently around 158.00.

GBP/JPY: Four-hour chart

Trend: Further weakness expected

• AUD/USD bears are moving in on the 4-hour chart. 
• Weely structure is critical at this point and bears will note the resistance. 

AUD/USD is pressing up against an important resistance on the longer-term charts. The bears could be looking to move in at this juncture and the 4-hour chart analysis illustrates the key levels in the following top-down analysis. 

AUD/USD prior analysis

The price had been respecting the 21 EMA and support structure as illustrated above and bulls would have been seeking to engage at a discount at this juncture. 

AUD/USD weekly chart

On the other hand, on the weekly chart, the bears were taking note of the resistance and this leaves the price vulnerable still for the days ahead. 

AUD/USD live market 

The price did indeed resect the support and rallied from there, as forecasted in the prior analysis above. The big bearish candle is now the focus with the price so far capped by a 38.2% Fibo retracement of the bearish impulse.

The focus is on the downside for a restest of the support near 0.7150. Below there, the bears could be encouraged to move to the longer-term charts and assess the landscape as follows:

The 4-hour chart, left, shows where price could head to, 0.7150, and a break of which will open the risk of the beginnings of a significant shift longer-term in the price's trajectory, according to the weekly chart, right. 

• WTI bulls keep reins despite snapping eight-week uptrend.
• US highlights possibilities of imminent Russian invasion, Moscow rejects claims.
• DXY fails to cheer risk-off mood amid downbeat yields.
• Fedspeak, PBOC rate decision may offer immediate catalysts, PMIs, US PCE Inflation will be crucial.

WTI crude oil prices remain on the front foot around $91.45, up 1.30% intraday while consolidating the first weekly loss in nine during Monday’s Asian session.

Although fears among the energy bulls could be spotted as the key catalyst for the black gold’s first weekly loss in multiple weeks, geopolitical noise surrounding Russia and Ukraine joins the OPEC+ supply concerns to keep WTI buyers hopeful. It’s worth noting that the Fed’s rate hike chatters and inflation woes add to the upside filters of the energy prices.

That said, Ukraine and the West continue to suggest an imminent Russian military attack on Ukraine. However, Moscow rejects the claims. Recently, a Reuters’ witness said, “Explosion was heard in the center of the rebel-held city of Donetsk in eastern Ukraine.” It’s worth noting that a diplomatic meeting between US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov can provide the ray of hope to witness a de-escalation of the geopolitical fears and hence the WTI bulls take a cautious approach ahead of the key meeting outcome.

Elsewhere, the OPEC+, a group of the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, struggle to match the output hike promises. Recently, OPEC President Bruno Jean-Richard Itoua mentioned that the oil supply is not now enough and blamed oil companies for not investing enough.

Alternatively, fears of the Fed’s faster rate hikes and inflation woes challenge oil traders at multi-month highs. On the same line is the latest risk-off mood, portrayed by downbeat US Treasury yields and stock futures.

That said, WTI crude oil traders will keep their eyes on the Russia-Ukraine developments for fresh impulse ahead of the key US-Russia meeting late in the week. Should the tension de-escalate, the odds of witnessing a sharp pullback in the oil prices can’t be ruled out.

Read: WTI oil outlook: Oil prices can fall more on easing geopolitical tensions

Technical analysis

The 21-DMA precedes a monthly support line, respectively around $89.10 and $87.95, to limit WTI pullback. However, firmer RSI and ability to stay beyond key supports, not to forget strong fundamentals, keep oil buyers hopeful to renew 2022 high, currently around $94.00.

• USD/JPY skids lower to 114.87 amid the improvement in safe-haven appeal.
• The extension of military drills in Belarus may dent the market sentiment further.
• Bears may get stronger once the asset skid below 114.80.

The USD/JPY pair has witnessed intensified selling right from the first tick on Monday as investors have preferred the Japanese yen over the greenback amid improving safe-haven appeal. Bears are likely to drift USD/JPY lower to 114.80 and follow-up selling may take place once it gets failed to attract substantial bids near it.

The negative developments over the Russia- Ukraine tussle have spooked the market sentiment. Latest headlines from eastern Ukraine that Russia will extend military drills in Belarus that were due to end on Sunday, the Belarusian defence ministry announced, has added fuel to the fire.

Earlier, the Russian leader Vladimir Putin on a phone call with French President Emmanuel Macron on Sunday blamed the Ukrainian military for the escalation of tensions in the Donbas, as per the BBC news.

Meanwhile, the US dollar index (DXY) has opened on a positive note on Monday as investors have preferred the DXY to coincide with the risk-aversion theme. The US markets are closed on Monday on account of President’s Day therefore, investors will put more emphasis upon the headlines on the developments over the Russia-Ukraine tensions. However, the speech from the Federal Reserve (Fed)’s member Michelle W. Bowman, which is due on Monday will provide some insights into the strategy of the Fed to combat inflation.