CFD Markets News and Forecasts — 25-02-2022

• The NZD dollar vs. the JPY finished tie week gaining 1.25%.
• NZD/JPY Technical Outlook: Neutral-upward biased, confirmed by a bullish RSI.

FInishing a busy week on the financial markets, the NZD/JPYended it on the right foot, up 1.25% in the week. Breaking news that Russia would be open to sit down and talk with the Ukrainian Government, increased appetite for riskier assets In the FX space means that risk-sensitive currencies like the NZD and the AUD rose to the detriment of safe-haven peers, like the low yielder Japanese yen. At the time of writing, the NZD/JPY is trading at 77.95.

Friday’s overnight session for North American traders portrayed an upbeat market sentiment, despite the continuation of Russia’s invasion of Ukraine, announced by Russian President Vladimir Putin. In the Asian session, the NZD/JPY was subdued in the 77.20-50 range. However, in the middle of the European session, earlier of New York’s open, the NZD/JPY pair moved upwards, rallying 44-pips, setting Friday’s daily high at78.01.

NZD/JPY Price Forecast: Technical outlook

The NZD/JPY began the North American session, confined between the 50 and the 200-day moving (DMA), lying at 77.26 and 77.89, respectively but late in the New York session, rallied toward 78.00, backtracking to current levels. Based on that, the pair is neutral biased, but the Relative Strength Index (RSI) at 58.50 above the 50-midline and aiming higher indicates the NZD/JPY is bullish biased with enough room before reaching overbought levels. That said, the NZD/JPY is neutral-upward bias.

Upwards, the NZDY/JPY first resistance would be 78.00. Breach of the latter would pave the way towards the 100-DMA at 78.34, followed by January 13 daily high at 78.83.

On the flip side, the NZD/JPY first support would be the 200-DMA at 77.89. Once cleared, the next support would be 50-DMA at 77.26, followed by the 77.00 mark.

• AUD/USD saw a stunning rebound on Friday, rallying back to the mid-0.7200s as risk appetite improved.
• That marks a near 2.0% rebound from Thursday’s post-Russia invasion of Ukraine lows.
• Next week will be busy with the RBA deciding policy, US jobs and ISM surveys and Aussie GDP plus geopolitics.

AUD/USD saw an ultra-impressive rebound on Friday, with the pair rallying back into the mid-0.7200s despite ongoing uncertainty about the European geopolitical landscape and the global economy as fighting between Russian and Ukrainian forces in Ukraine intensified. The pair currently trades in the 0.7330s, up roughly 1.0% on the day, with the Aussie one of the best performing G10 currencies on the session. That marks a near 2.0% rebound from Thursday’s intra-day sub-0.7100 lows.

The recovery on Friday was in part driven by tailwinds the risk-sensitive Aussie received from a rally in global equity markets as traders took a more sanguine view on recent geopolitical events. Traders said sanctions imposed by the West so far on Russia were “soft”, easing fears about energy supply disruptions somewhat, whilst hopes for a diplomatic solution to the war remained. But market commentators also cited healthy dividend payouts from Australian minors, which are normally converted to USD from AUD, as helping support the Aussie throughout the week.

Analysts said the payout could have been worth as much as A$20B, but have not finished, implying the Aussie might be exposed to more downside risks next week. As geopolitical developments in Europe remain front and centre of investors' minds, next week is likely to remain choppy and headline-driven. But its also a big week for economic data and central bank events. US jobs and ISM survey data for February are due, while down under, the RBA will decide on policy and Q4 Australia GDP figures will be released.

• GBP/JPY reclaimed the 155.00 level on Friday, the pair lifted as a risk appetite revival undermined yen demand.
• But GBP/JPY continues to trade lower by about 0.8% on the week and ongoing uncertainty regarding geopolitics.

GBP/JPY was able to reclaim the 155.00 level on Friday, with the pair lifted as a strong recovery in US equity markets and other risk assets dampened demand for the safe-haven yen. At current levels just to the north of the big figure, the pair now trades with gains of more than 1.0% versus Thursday’s lows. From a technical standpoint, the fact that the 200-Day Moving Average at 153.39 held up so well on Thursday (it literally formed the low point of the day’s trade) is a good sign for the bulls.

But GBP/JPY continues to trade lower by about 0.8% on the week and ongoing uncertainty regarding geopolitics and how the war in Ukraine will impact the European/global economy may mate it difficult for the pair to push substantially higher. The West’s sanction response so far to Russia has been seen as soft and there is still hope for a diplomatic solution to the war but fighting in Ukraine is intensifying and casualties are piling up. Depending on developments over the weekend, things really could go either way for GBP/JPY.

• In the week, XAU/USD is losing so far 0.30%, snapping three consecutive weeks of gains.
• A risk-on market mood, and high US T-bond yields, weighed on the non-yielding metal.
• XAU/USD Technical Outlook: Downward biased, as a bearish harami candle chart pattern looms.

Gold (XAU/USD} is set to end the week with losses after reaching a daily high at $1974.48 on Thursday. Breaking news that Russia would be open to sit down and talk with the Ukrainian Government, increased appetite for riskier assets, to the detriment of save-haven assets, like precious metals and low yielder currencies. Said that XAU/USD remains beneath the $1900 handle, trading at $1892 at the time of writing.

A busy week in the global financial markets witnessed how fragile the market sentiment is. The Ukraine-Russia conflict does not ease, and in fact, as of late, reports said that attacks on Ukraine’s capital Kyiv increased. Ukrainian Ambassador to the US Markarove stated that Russia’s attack on Ukraine has been more brutal, while Kyiv’s mayor reported blasts within minutes, which were heard close to a power station in Kyiv.

Despite the aforementioned, the market mood persists upbeat, as shown by US equities trading in the green, probably on month-end flows. Nevertheless, the greenback falls 0.50% sits at 96.68, while the rise in US Treasury yields weighed on the non-yielding metal, with the 10-year note up 1.5 bps sitting at 1.988%.

XAU/USD, in the last two days, rallied to a one-and-a-half-year high at $1,974.48 early Thursday but has plunged since then and so far failed to cling to the $1900 area. Worth noting that some investors are aware that the Russian Central Bank has some reserves in gold and booked profits ahead of reaching the $2,000 mark in fears that President Putin could use some of those to support the Russian ruble.

The US economic docket reported some macroeconomic data earlier. Durable Good Orders for January smashed expectations rising 1.6% m/m, while Fed’s favorite measure of inflation, PCE annually based, broke the 6% threshold. That said, Fed odds of hiking rates in the March meeting have risen. Later, the UoM Consumer Sentiment for February kept above the 60.0 threshold, but trailed January readings.

Gold Price Forecast: XAU/USD

XAU/USD price action in the week saw a move of $100 on Thursday, as Russia/Ukraine tensions increased. However, Thursday’s candle left a huge wick above the real body, demonstrating intense selling pressure mounted above  $1,909. That, alongside Friday’s price action, confirms a bearish harami pattern that would be validated once XAU/USD breaks the $1,878.09 support.

XAU/USD’s first support level would be February 24 daily low at $1,878.09. Breach of the latter would expose the 9-month-old resistance/support trendline around $1,850-55, and then a test of the 50-day moving average (DMA) at $1,829.76.

Russia's Foreign Ministry on Friday said that Kyiv had refused talks with Moscow, Russia's Interfax report. However, Kyiv proposed to return to the issue of talks on February 26. 

• Silver prices have traded in subdued fashion on Friday as a sharp pick up in risk appetite dampened safe-haven demand.
• Spot prices have remained subdued in the low $24.00s with the $24.50 mark acting as a ceiling.
• As the war in Ukraine rages on and the Western sanctions response to Russia evolves, uncertainty remains high.

A surge in risk appetite that has seen US equity push back to highs on the week and risk-sensitive currencies perform well is weighing heavily on safe-haven assets like precious metals, government bonds and the US dollar and yen. Hopes that there might be an opportunity for diplomacy between Russia and Ukraine that could bring an end to the war just as it is getting started are one factor fuelling the better mood. The West’s “soft” sanction response to Russia (so far) that has avoided hitting the country’s energy sector is another. Spot silver (XAG/USD) prices have unsurprisingly struggled to make headway on the final trading day of the week, with the $24.50 level acting as a ceiling to the price action.

At current levels around $24.10, silver prices are down about 0.5% on the day and nearly 6.0% lower versus Thursday’s highs above $25.50. Whether the air continues to come out of silver’s recent geopolitical tensions-fuelled rally (XAG/USD is still up more than 7.0% on the month) will be headline dependent. If the chatter about talks between Moscow and Kyiv that could result in an early end to the war does continue to gain traction, that could be a negative catalyst that sends spot silver back below $24.00.

Alternatively, momentum seems to be building towards Western nations kicking Russia out of the SWIFT international payments system, which could reignite some fears about economic disruption. If momentum also builds towards energy sanctions, economic uncertainty and demand for inflation protection could easily lift XAG/USD back above its 200-Day Moving Average at $24.20 and into the upper $24.00s. Traders should remain on their toes. Dependent on developments over the weekend, things could go either way quite aggressively next Monday.

In a statement on the Russo-Ukraine was released on Friday, China said that Ukraine's territory and sovereignty should be respected and urged talks between Ukraine and Russia as soon as possible. China also called for a diplomatic resolution to the crisis as soon as possible. 

• The euro edges down 0.58% so far in the week, after falling in three of the week’s five trading days.
• The EUR/USD reached a 2022 YTD low at 1.1106 on Thursday.
• EUR/USD Technical Outlook: The pair is downward biased.

On Friday, the EUR/USD trims some of its weekly losses, recording gains of 0.48% during the North American session. At press time, the EUR/USD is trading at 1.1252.

In the overnight session for North American traders, the shared currency seesawed in the 1.1168.1,1230 range, most of the time. Nevertheless, before Wall Street’s opened, the EUR/USD rallied above 1.1200, breaking on its way, the 100-hour simple moving average (SMA) at 1.1223, reaching a daily high at 1.1266 to stabilize around the 1.1240 area.

EUR/USD Price Forecast: Technical outlook

On Thursday, the EUR/USD reached a YTD low at 1.1106, near the 1.1100 mark, though closed above the mid-line between the top/central Pitchfork’s parallel lines, suggesting profit-taking and buying pressure lifted the pair at the end of New York’s session. It is worth noting that EUR/USD daily moving averages (DMAs) reside above the actual exchange rate, indicating a downward bias. That said, the EUR/USD could aim higher, near February 24 daily high at 1.1308, followed by a leg-down towards the 1.1000 area.

In that outcome, the EUR/USD first support would be 1.1200. Breach of the latter would expose Pitchfork-s mid-line within the top/central parallel lines around 1.1165, followed by February 24 daily low at 1.1106.

• The NZD/USD climbs 0.64% in the week.
• Russia’s attack on Ukraine extends for the third consecutive day amid reports that Putin’s open for talks with Ukraine.
• NZD/USD Technical Outlook: Neutral biased, but the 50-DMA capped Friday’s upward move.

Friday’s trading session so far witnessed risk appetite improved as European and US equities trade in the green, ahead of the weekend on a busy week in the financial markets. In the FX space, risk-sensitive currencies like the antipodeans led by the NZD and the AUD gains, while safe-haven status ones fall. At press time, the NZD/USD surges, trading at 0.6730.

Developments in the Ukraine – Russia conflict

Russia’s attack on Ukraine persists for the third straight day. However, Russias Vladimir Putin reportedly would send a delegation to Minsk for talks with Ukraine. The headline shifted the market mood positively, increasing demand for riskier assets.

It is worth noting that Bloomberg reported that Kyiv’s fall to Russian forces could happen in the next 24/48 hours. That could spur a swing in the market mood, increasing appeal for safe-haven status.

During the Asian session, Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr crossed wires, saying, “We’re particularly concerned about inflation expectations,” considering conditions in Ukraine. The Governor also commented that it would “Keep the possibility of moving rates quicker if necessary.”

The US economic docket featured Durable Goods Orders for January, at 1.6% m/m, higher than 0.6%  estimated. Meanwhile, the Federal Reserve’s favorite inflation gauge, the PCE, rose to 6.1% y/y, higher than the 5.8% foreseen, while Core PCE rose to 5.2%, more than the 5.1% expected. Additionally, the University of Michigan Consumer Sentiment Final for February increased to 62.8, better than the 61.7

NZD/USD Price Forecast: Technical outlook

The NZD/USD is neutral biased, though it is trading above the 50-day moving average (DMA) at 0.6724, signaling that an uptrend would accelerate but would be subject to Friday’s daily close above the former.

IF that scenario plays as planned, the NZD/USD would be exposed to upward pressure. That said, the NZD/USD first resistance would be the February 23 high at 0.6809. Once cleared, the following resistance level would be the 100-DMA at 0.6850. Breach of the latter would expose January 13 daily high at 0.6890.

• US equity markets built on Thursday’s stunning intra-day rebound to press higher on Friday despite intensified fighting in Ukraine.
• The West’s soft sanction response plus the US equity market’s strong track record of overcoming geopolitical uncertainty are helping.
• The S&P 500 was last up 1.9%, the Nasdaq 100 up 1.2% and Dow up 2.2%.

Despite an intensification of the fighting in Ukraine, US equity markets have built upon Thursday’s historic intra-day rebound on Friday and look on couse to end the week at highs. The S&P 500 index, which tested 4100 in premarket trade on Thursday, is now trading in the 4370 region, up more than 6.0% from earlier weekly lows and up a further 1.9% on the day on Friday. The rebound over the last two sessions means that the S&P 500 index is, for now, out of “correction” territory – i.e. it is less than 10% below its early January record highs.

Traders/market commentators have attributed a variety of factors as driving the rebound. Firstly, after the initial panic in wake of Russia’s abrupt invasion of Ukraine on Thursday, it quickly become clear to many that the EU and US would not implement sanctions on Russian energy exports amid fears of inflicting economic self-harm. As long as that remains the case, that lessens some of the stagflationary risks associated with the Russo-Ukraine war. Others have cited the fact that, in the past, major geopolitical events have not had a lasting impact on US equity valuations, meaning there has been plenty of demand to buy the dip.

US economic data on Friday was strong, with January personal income and spending metrics both exceeding expectations and durable goods orders over the same period also seeing strong growth, suggestive of economic resilience despite the high prevalence Omicron in January. Economic optimism combined with the fact that the latest Core PCE inflation report (also for January) was largely in line with expectations is likely contributing to the rally.

The latest inflation figures were not viewed as raising the risk of the 50bps Fed rate hike in March, with 25bps now the base case amid new geopolitical uncertainties. This uncertainty was referenced a few times in the Fed’s latest semi-annual Monetary Policy Report and has been mentioned a few times by policymakers over the last two days. Though Fed hawks James Bullard and Christopher Waller seem keen on a 50bps move in March, most other Fed members sounded more cautious.

Looking at the other major US indices; the Nasdaq 100 index rallied more than 1.0% and, likely to the disappointment of the bears, managed a convincing break back to the north of the 14K level. The Nasdaq is stunning more than 8.0% up from its earlier weekly lows near 13K. The Dow, meanwhile, was up roughly 2.2% and is back to probing weekly highs at the 34K level, roughly 5.0% up versus earlier weekly lows. The CBOE Volatility Index or VIX fell three points to the mid-27.00s, a more than 10 point drop from Thursday highs in the 37.00s.

• EUR/GBP hit two-week highs above 0.8400 on Friday but failed to hold and has since dipped to the 0.8380s.
• The pair has been more rangebound than others recently amid UK/EZ growth and BoE/ECB policy uncertainty post-Russia’s invasion of Ukraine.

EUR/GBP hit its highest level in two weeks on Friday, at one point rallying to the north of the 0.8400 level in choppy post-US open trade, though the pair has since swung lower into the 0.8380s again. Friday’s move is consequential insofar as the pair has broken to the north of a 0.8310-0.8380ish range that had prevailed for the rest of the week up until now. But failure to push above resistance in the 0.8400 area and manage a clean break beyond suggests that a more sustained rebound towards monthly highs near 0.8480 isnt really on the cards just yet.

EUR/GBP’s rangebound conditions in recent days stand in sharp contrast to many other FX pairs/asset classes which have seen very high volatility as a result of Russia’s invasion of Ukraine on Thursday. Traders have struggled to determine whether recent developments are bullish or bearish for the pair. Does the damaging impact on global risk appetite favour a higher EUR/GBP because sterling is more risk-sensitive? Or does the EU’s vulnerability to disruptions in Russian energy imports suggests a weaker EUR/GBP given higher risk premia priced into the euro?

Meanwhile, traders are also questioning how recent events might shape the outlook for BoE/ECB policy divergence. The BoE, though continuing to lift interest rates back towards pre-pandemic levels, has sounded more dovish recently about the prospect for long-term tightening. Uncertainty due to war in Ukraine will likely dampen GDP growth this year and further dampen the prospect for long-term tightening. But the same can be said for the Eurozone and the ECB, despite high inflation, might be inclined to stick to its current QE taper plans and push any rate hikes back to 2023.

• The USD/CHF is gaining 0.65% during the week, ahead of the weekend.
• Improved market mood spurred by some developments in Ukraine boosted the greenback.
• USD/CHF Technical Outlook: Neutral biased, with the DMAs almost horizontal in the daily chart.

The USD/CHF advances sharply in the day, amid an improved market sentiment, as Russian President Putin reportedly is ready to send a delegation to Minsk for talks with Ukraine. At the time of writing, the USD/CHF is trading at 0.9276, approaching an eleven-month-old down trendline.

On Friday, during the overnight session for North American traders, the USD/CHF fluctuated between 0.9230—0.9260, with an unclear bias. However, late in the European session, the pair rallied towards 0.9282, an upward move capped by the 11-month-old abovementioned trendline.

USD/CHF Price Forecast: Technical outlook

The USD/CHF bias is neutral, and the pair faces strong resistance at a downslope trendline. However, the daily moving averages (DMAs) below the spot price would advise the USD/CHF as upward biased, but the DMAs slope is almost horizontal.

Upwards, the USD/CHF first resistance would be 0.9282. Breach of the latter would expose February 18 daily high at 0.9296, followed by January 31 daily high at 0.9342.

On the flip side, the USD/CHF first support is 0.9200. Once cleared, the next demand zone would be February 23 daily low at 0.9150, followed by 0.9100.

The US Federal Reserve on Friday released its semiannual Monetary Policy Report (MPR), which it normally does one week ahead of Fed Chair Jerome Powell's semiannual testimony before the US Congress. The report reiterated the Fed's policy guidance that it will soon be appropriate to raise the target range for the Federal Funds rate. 

Additional Takeaways: 

• With Omicron cases having declined sharply since mid-January, the US slowdown is expected to be brief. 
• The FOMC expects it will soon be appropriate to raise the target range for the federal funds rate. 
• Inflation readings over the second half of the year suggested that broader-based inflationary pressures had taken hold.
• Recent geopolitical tensions related to the Russia–Ukraine situation are a source of uncertainty in global financial and commodity markets.
• Upward pressure on inflation from prices of goods experiencing both supply chain bottlenecks and strong demand, such as motor vehicles and furniture, has persisted.
• The Fed continues to evaluate the potential systemic risks posed by hedge funds and digital assets and is closely monitoring the transition away from LIBOR. 
• A wide range of indicators have been pointing to a very tight labor market.
• The share of categories seeing price increases of 3% or more is above 60% but still below the share seen in the 1970s.
• It is too early to tell what the ultimate effect of the pandemic will be on productivity growth in the coming years. 
• Share of higher inflation in services in recent months likely in part due to labor market inflation pressures. 
• With appropriate policy, inflation is expected to decline over the course of the year as supply constraints ease and demand moderates.
• Geopolitical tensions with Russia have also contributed to higher energy prices, including oil and natural gas. 

• US dollar weakens on Friday amid risk appetite.
• A quiet session for cable on Friday after sharp moves.
• GBP/USD is about to post the worst weekly results in months.

The GBP/USD has been moving sideways near 1.3400 in the European session. The pair is trading modestly higher on Friday, holding onto late Thursday’s rebound but in negative territory for the week.

After falling on Thursday to 1.3272, GBP/USD rebounded and peaked on Friday at 1.3440, before retreating to 1.3365. The mentioned level has become a key short-term support. The pair is moving around 1.13400, about to post the worst weekly loss in months.

The deterioration in market sentiment weighed on cable, while the pound lagged behind other currencies in the rebound. EUR/GBP hit a two-week high above 0.8400

Week ahead

Key economic report next week includes the US employment report, while in the UK, no major releases are due, and the focus will be on central bankers. “By the end of Wednesday, we will have heard from all nine Bank of England committee members in the space of a little over a week. That's interesting in itself, having had virtually no commentary from Bank officials in the December-February intermeeting period”, explained analysts at ING.

Regarding the UK outlook, analysts at ING point out “the pressure on household incomes from energy prices is likely to result in slower, perhaps negative growth, later this year. We also expect some of the recent pressure on wages to abate now that the post-reopening movement in the jobs market slows. We therefore think the Bank will deliver fewer hikes than markets expect this year.”

Despite a positive ending so far for financial markets, the advance of Russian troops in Ukraine and its consequences will continue to be a key driver.

Technical levels

German Finance Minister Christian Lindner said on Friday that we must step up sanctions against Russia and that we are open to cutting Russia out of the SWIFT international payments system. Just because we have been thinking about the consequences of cutting Russia out of SWIFT doesn't mean we are against it, Lindner added. 

Following an impressive rally to its highest level since September 2020 at $1,974 on Thursday, gold declined below $1,900 on Friday and ended up snapping a three-week winning streak. The yellow metal is set to continue its move higher on protracted tensions in Ukraine, FXStreet’s Eren Sengezer reports.

Technical outlook remains bullish as long as $1,870 support holds

“In case Russia reaffirms its intention to look for a diplomatic solution and refrains from advancing its troops early next week, gold is likely to face additional selling pressure. On the flip side, a prolonged military conflict with Russia's intention to take over Kyiv and additional sanctions from the west could support the precious metal.”

“FOMC Chairman Jerome Powell will testify before the US Senate Banking Committee. If the chairman hints at the possibility of a 50 basis points rate hike in March, gold could start pushing lower. On the flip side, markets are currently pricing a very small chance of a double-dose hike in March and a dollar selloff should be limited in case Powell goes against it.” 

“The initial support is located at $1,870 (static level, ascending trend line). In case XAU/USD makes a daily close below that level it could extend its slide toward $1,850 (static level, 20-day SMA).” 

“On the upside, $1,900 (psychological level) aligns as first resistance. If buyers managed to flip that level into support, $1,910 (static level) could be seen as the next hurdle before $1,920 (static level).”

See – Gold Price Forecast: XAU/USD to see a renewed upswing in the next few days – Commerzbank

• The USD/JPY gains 0.45% in the week amid an improved market mood.
• Reports from Russia said that Vladimir Putin is open to sending a delegation to Minsk for talks with Ukraine.
• USD/JPY Technical Outlook: Upward biased, but a daily close above 115.49, would open the door for a renewed challenge of YTD high at 116.35.

The USD/JPY is set to finish the week with gains, climbing 0.45%, amid a risk-on market mood, portrayed by global equities, while in the FX space, high-beta currencies lead. Newswires reported that Russian President Vladimir Putin is ready to hold talks with the government in Ukraine following the Russian invasion. The USD/JPY barely advances 0.02%, trading at 115.57 at press time.

Ukraine – Russia conflict update

Although Russia’s attacks continue for the third consecutive day, Russian Federation President Vladimir Putin “reportedly” is open to sending a delegation to Minsk for talks with Ukraine. The headline has kept investors calmed, as safe-haven peers recorded gains for two consecutive days. However, as reported by Bloomberg, it is only a matter of time before Russia’s forces would take control of Kyiv. That said, uncertainty keeps surrounding the Ukraine – Russia conflict, though caution is warranted when trading the financial markets.

In the meantime, the US economic docket featured Durable Goods Orders for January, which came at 1.6% m/m, higher than 0.6%  estimated. Meanwhile, the Federal Reserve’s favorite inflation gauge, the PCE, rose to 6.1% y/y, higher than the 5.8% foreseen, while Core PCE rose to 5.2%, more than the 5.1% expected. Additionally, the University of Michigan Consumer Sentiment Final for February increased to 62.8, better than the 61.7

USD/JPY Price Forecast: Technical outlook

The USD/JPY daily chart depicts the pair as upward biased. The daily moving averages (DMAs) reside below the spot price, with a bullish slope, but to further cement its bias, it would require a daily close above the February 24 close at 115.49.

If that scenario plays out, the USD/JPY first resistance would be February 15 daily high at 115.87. A decisive break would send USD/JPY towards 116.00, followed by the YTD high at 116.35.

• Gold has been unwinding the war-related gains, dropping under $1,900.
• Critical support awaits at $1,885, followed only by $1,868. 
• Resistance is at $1,899, then $1,902, if the precious metal recovers. 

Will hostilities end in Ukraine? Russia's offer to talk in Minsk has been underpinning a market recovery. The move to stocks from bonds means lower yields, which in turn, has pushed gold lower.

How is gold positioned on the technical chart? 

Gold Price: Key levels to watch

The Technical Confluences Detector is showing that gold is struggling around $1,889, which is the convergence of the Fibonacci 23.6% one-week and the SMA 5-15m. 

Looking down, $1,885 is a juncture of lines including the Pivot Point one-month Resistance 2 and the 10-day Simple Moving Average. It is critical support.

Looking down, the next level to watch is $1,868, which is where the Fibonacci 61.8% one-week hits the price.

Resistance is at $1,899, which is the confluence of the Bollinger Band 15min-Middle and the Fibonacci 161.8% one-month. 

Close by, $1,902 is another tough cap, which is where the Fibonacci 23.6% one-day and the 5-day SMA converge. 

XAU/USD Confluence levels

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

• WTI has eased back to near $92.00 from Asia Pacific session highs above $95.00 since the start of European trade.
• In the absence of US/EU/UK sanctions that directly hit Russian energy exports, the case for WTI near $100 is weakened.
• Expectations for a US/Iran nuclear deal and coordinated global oil reserve release has further dampened the price action.

Front-month WTI futures are back to trading in the $92.00 area once again, having ebbed back from Asia Pacific session highs in the $95.00s. Russia renewed its assualt on Ukraine’s capital city of Kyiv during Friday’s Asia Pacific session, which seemed to support oil prices at the time, though the bulls had lost the upper hand by the time European markets opened. Prices are currently probing Thursday’s lows in the mid-$91.00s, a break below which would open the door to a test of earlier weekly lows sub-$91.00.

As the fighting in Ukraine intensifies, a significant degree of risk premia is likely to remain embedded in crude oil prices. However, in the absence of sanctions from the likes of the US, EU and UK that directly target/restrict Russian energy exports, the case for WTI to remain at or near $100 per barrel does not seem to be there. That is escpecially true in the context of other recent key developments, including a further coordinated global release of crude oil reserves (again headed by the US) and US/Iran progress towards a deal on nuclear.

This has helped ease concerns about near-term crude oil market tightness. But Western powers have said all options regarding sanctions on Russia remain on the table, including on its energy sector. It will be key to continue to watch how the Russia/Ukraine war unfolds and whether EU/US leaders succumb to pressure to do more to deter Russian aggression. For now, a sustained break below $90.00 seems unlikely.

Elsewhere, oil prices did not respond to reports that OPEC+ is likely to stick to its existing policy of increasing output quotas at a measured pace of 400K barrels per day each month at its upcoming meeting on March 2. The group's decision would come despite the recent surge in prices following Russia's invasion of Ukraine.

• US dollar drops across the board as stocks surge.
• Mexican peso up supported by risk appetite.
• USD/MXN still up for the week, significantly off highs.

The USD/MXN is falling on Friday after having the biggest daily gains in a month on Thursday. The dollar jumped following the Russian invasion and peaked at 20.78, the highest level in almost a month. Currently, it is back under 20.50.

Thursday’s panic across financial markets pushed USD/MXN to the highest in almost a month. When stocks started to recover, the pair trimmed gains and closed the day under 20.60. On Friday, the recovery of the Mexican peso continues, supported by the better tone across markets.

The USD/MXN bottomed at 20.37 and is it hovering around 20.45. It is far from the weekly top but still positive, about to post the first gain in four weeks. The short-term outlook looks biased to the upside, particularly if it rises back above 20.50. A slide under 20.30 would expose 20.25 and the February low at 20.15.

Wall Street indices are mixed, and European stocks are up 3% on average. Economic data from the US came in above expectations, helping risk sentiment and not the dollar. In Mexico, the data showed the economy stagnated in the fourth quarter after a 0.4% contraction in the third.

USD/MXN daily chart

• DXY corrects lower and drops to 96.80.
• Markets’ mood improves on potential Russia-Ukraine talks.
• US PCE rose 6.1% YoY in January, Core PCE gained 5.2%.

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main competitors, comes under pressure and slips back below the 97.00 yardstick on Friday.

US Dollar Index looks offered on auspicious news

The index gives away further ground following a tepid change in the markets’ mood after news reported a probable meeting between Russian and Ukrainian officials despite the relentless advance of Russian troops into the country.

The rebound in the appetite for riskier assets also see US yields leaving behind the earlier pessimism and now trading with modest gains for the day.

In the US calendar, inflation tracked by the headline PCE rose 6.1% YoY and 5.2% when excluding food and energy costs. Additional data noted Durable Goods Orders expanding 1.6% MoM in January, Personal Income coming in flat vs. the previous month and Personal Spending growing 2.1% MoM.

Later in the session, Pending Home Sales and the final print of the Consumer Sentiment are also due.

What to look for around USD

The appetite for safer assets continues to bolster the dollar and keeps the index on the positive footing on the back of the deterioration of the geopolitical scenario. The constructive view in the buck remains underpinned by the current elevated inflation narrative and the probability of a more aggressive start of the Fed’s normalization of its monetary conditions. In the longer run, 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: 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.

US Dollar Index relevant levels

Now, the index is losing 0.30% at 96.75 and a break above 97.73 (2022 high Feb.24) would open the door to 97.80 (high Jun.30 2020) and finally 98.00 (round level). On the flip side, the next down barrier emerges at 96.03 (55-day SMA) followed by 95.67 (weekly low Feb.16) and then 95.17 (weekly low Feb.10).

European Central Bank President Christine Lagarde said on Friday that the central bank stands ready to take whatever action is needed to ensure price stability and financial stability in the Eurozone, reported Reuters. Lagarde said that it would be premature to assess the exact impact of the conflict in Ukraine just yet, but warned that the two main channels for the economy would be via prices and confidence. Uncertainty is likely to act as a drag on consumption and growth, she continued, adding that optionality and flexibility remain needed. We'll analyse on March 10 what to do next. 

Market Reaction

The euro doesn't seem to have reacted to Lagarde's latest remarks. 

• EUR/USD is trading in much calmer fashion this Friday near the 1.1200 level following Thursday’s massive 200 pip intra-day swing.
• Risk appetite has been on the front foot on Friday, helping push EUR/USD to session highs at 1.1230.
• As geopolitical uncertainty remains elevated and clouds the Fed/ECB policy outlook, EUR/USD may remain contained within 1.1100-1.1300 ranges.

Following Thursday’s extreme volatility that saw EUR/USD drop as much as 200 pips intra-day from above 1.1300 to multi-month lows near 1.1100 after FX markets were roiled by Russia’s decision to launch a full-scale invasion of Ukraine, trade has calmed. The pair has spent Friday’s session pivoting the 1.1200 level as FX market participants come to terms with the largest war in terms of scale in Europe since the end of the second world war. At present, the pair trades with gains of about 0.3% on the day in the 1.1220 area, having seen some strength in recent trade in tandem with improving risk appetite as Russia indicated it was ready for talks with Ukraine.

The Kremlin said it was ready to send a delegation to Minsk, which appears to have revived some minor hopes that a diplomatic solution could halt hostilities. Such hopes are likely unfounded against the backdrop of a further intensification of fighting in Ukraine, as Russian forces struggle to make progress against allegedly highly motivated Ukraine resistance. That suggests the scope for a lasting EUR/USD rebound may be limited for now, especially as the US and EU prepare further sanctions against Russia.

Russian President Vladimir Putin and Foreign Minister Lavrov will both see their European assets frozen in the EU, reports suggest, though for now, the Western response continues to be viewed as soft, given no sanctions yet target Russian energy exports. Another consideration for EUR/USD traders is the implication the war in Ukraine will have on the ECB and Fed policy outlook. So far the market’s view regarding the Fed is that a 50bps hike in March is now less likely. But there appears to be more confusion about how events will impact the ECB.

ECB Chief Economist Philip Lane outlined various scenarios in public remarks on Friday and in all he sees the conflict weakening Eurozone growth and pushing higher inflation. “It seems likely that the ECB will revise its inflation forecast upwards,” said one analyst, concluding that “we may still get an accelerated tapering, as long as the conflict stays within Ukraine”. For now, as uncertainty remains elevated on multiple fronts, EUR/USD may continue to trade within 1.1100-1.1300 ranges.

• USD/RUB stays well on the defensive on RUB gains.
• Geopolitical jitters mitigate on probable negotiation talks.
• US Core PCE rose more than expected in January.

The Russian currency keeps the bid bias unchanged so far on Friday and now drags USD/RUB further south of the 82.00 mark, just to bounce a tad afterwards.

USD/RUB weaker as risk mood improves

USD/RUB extended the corrective downside to the 81.70 zone following news of a probable meeting between Russian and Ukrainian delegations.

In the meantime, Russian troops have already moved into Kyiv, while Russian forces are cited attacking cities in the west of the country.

Meanwhile in Moscow, the MOEX index advances more than 20% and continues to trim part of Thursday’s acute drop and yields of the Russian 10y benchmark note surpasses the 13.00% mark, still below Thursday’s tops around 14.00%.

USD/RUB levels to watch

So far, the pair is losing 1.84% at 82.80 and faces the next hurdle at 86.43 (high Feb.25) followed by 90.00 (all-time high Feb.23) and then 100.00 (round level). On the downside, a breach of 80.41 (monthly high Jan.26) would aim for 76.18 (55-day SMA) and finally 74.25 (monthly low Feb.10).

GBP/USD steadies after taking a hammering this week. Economists at Scotiabank note that the broader balance of technical risks is tilted to the downside for the pound.

Firm resistance to gains between 1.3450/00

“Short-term trends suggest an intraday peak around 1.3440 now and we look for firm resistance to gains between 1.3450/00 in the coming days.”

“Support is 1.3290/00 ahead of a retest of the Dec lows at 1.3160/65.”

The UK Ministry of Defense said that Russia had so far made limited progress on Friday and that Ukrainian forces retain control over key cities, reported Reuters.  

• Silver turned lower for the second successive day on Friday and dropped to $24.00.
• Sustained break below an ascending trend line will set the stage for further losses.
• Bullish oscillators on the daily chart warrant caution for aggressive bearish traders.

Silver struggled to capitalize on its intraday uptick, instead met with a fresh supply near mid-$24.00s on Friday and turned lower for the second successive day. The white metal remained on the defensive through the early North American session and was last seen trading just above the $24.00 mark.

Some follow-through selling below the aforementioned handle will confirm a bearish breakdown through an upward sloping trend-line extending from the $22.00 mark, or the monthly low. This will set the stage for an extension of the overnight sharp pullback from the highest level since August 2021.

That said, technical indicators on the daily chart - though have corrected from higher levels - are still holding comfortably in the bullish territory. This makes it prudent to wait for a convincing break through the ascending trend-line before placing aggressive bearish bets around the XAG/USD.

The next relevant support is pegged near the $23.70 region, below with the downward trajectory could get extended towards the $23.35 area. The XAG/USD could eventually drop below the $23.00 mark, towards the $22.85 support zone.

On the flip side, any meaningful bounce from current levels now seems to confront stiff resistance near the daily swing high, around the $24.50-$24.55 region. Sustained strength beyond will negate will reaffirm the ascending trend-line support and push the XAG/USD back towards the $25.00 mark.

Silver daily chart

Technical levels to watch

• EUR/USD bounces off Thursday’s 2020 low near 1.1100.
• Near-term outlook remains negative below the 1.1350 zone.

EUR/USD trades on a better mood and regains the area further north of the 1.1200 barrier at the end of the week.

Thursday’s intense retracement dragged spot to new YTD lows just above of the 1.1100 mark. The pair remains under pressure and while capped by the 5-month resistance line, today near 1.1350, further losses should remain well on the cards. The breach of the 2022 low exposes an initial drop to the round levels at 1.1100 followed by 1.1000.

The negative outlook for EUR/USD is expected to remain unchanged while below the key 200-day SMA, today at 1.1618.

EUR/USD daily chart

Yesterday, Russia launched a full-scale invasion of Ukraine from multiple fronts. The crisis immediately plunged financial markets into risk-off mode. Strategists at ABN Amro focus on two key scenarios. They also offer an additional third, very negative scenario.

The price shock scenario (probability: 75%)

“Commodity prices continue their surge higher, and prices remain elevated for the foreseeable future until we see some moves to de-escalate the conflict. Price spikes will have macro-economic implications – primarily by pushing inflation higher, but with second-round effects likely dampening economic activity. With regards to monetary policy, while elevated inflation limits the scope for a significant easing of policy, the downside risks to growth make the risk even greater that the ECB will abort its planned end of asset purchases and rate hikes that we currently have in our base case for December.”

The supply shock scenario (probability: 20%)

“In addition to the price shock, physical supplies of gas are disrupted, perhaps as a counter-response to western sanctions. This depends naturally on just how severe western sanctions become. As well as even bigger gas price spikes, electricity markets would also see significant price surges as a spillover effect. As well as pushing inflation higher still, this would cause contractions in economic activity – i.e. we would essentially be facing a stagflation scenario. This would likely lead to the ECB stepping up asset purchases to stem spread widening.”

The severe supply shock scenario (probability: <5%)

“Western governments impose a ban on Russia’s use of the SWIFT payments system, causing major disruptions to all Russian commodity exports (i.e. not just gas, but also oil, metals and food). Alternatively, Russia itself imposes an export ban against Europe/the US. Either scenario would probably result in a global bottlenecks crisis. This would lead to even bigger shortages and price surges. For the global economy, we would expect the effects on growth (downward) and inflation (upward) to be intensified.”

• Headline and Core Durable Goods Orders rose at a faster than expected pace in January, with December figures also seeing positive revisions. 
• This didn't seem to provoke a market reaction with focus more on geopolitics. 

According to the latest release by the US Census Bureau, US Durable Goods Orders rose by 1.6% MoM in January compared to market expectations for a 0.8% rise in sales. That marked an acceleration versus December's 1.2% MoM pace of gain, which had seen a big revision higher from -0.7%. The more widely followed Core Durable Goods Orders growth rate was also stronger than expected at 0.7% MoM versus 0.4% consensus forecasts, with December's 0.9% MoM growth rate also being revised substantially higher from 0.6% previously. 

Market Reaction

It does not seem as though FX or other markets have reacted to the latest tranche of US data, with focus much more on geopolitical developments for now. 

• Core PCE inflation was a little higher than expected in January at 5.2% YoY. 
• This didn't seem to provoke a market reaction with focus more on geopolitics. 

Inflation in the US, as measured by the Core Personal Consumption Expenditures (PCE) Price Index, rose to 5.2% YoY in January, the US Bureau of Economic Analysis reported on Friday. That was above the median economist forecast for 5.1% and marked an acceleration on December's 4.9% reading. MoM, the Core PCE inflation rate was 0.6%, above the median forecast for a rate of 0.5%, and slightly above December's MoM inflation rate also of 0.5%. 

Core PCE is the Fed's favoured gauge of underlying inflationary pressures in the US economy. The headlines PCE rate of inflation was 6.1% YoY and 0.6% MoM. 

Market Reaction

It does not seem as though FX or other markets have reacted to the latest tranche of US data, with focus much more on geopolitical developments for now. 

OPEC+ is likely to stick to its existing policy of increasing output quotas at a measured pace of 400K barrels per day each month at its upcoming meeting on March 2, despite the recent surge in prices following Russia's invasion of Ukraine, five sources told Reuters.  

Market Reaction

Oil prices have not reacted to the latest reports. The main focus remains on whether the US and EU will target Russia with harsher sanctions that hit its energy sector and disrupt global energy supplies. At the moment, this seems unlikely, but as the fighting in Ukraine intensifies, public pressure may well build on governments to do more to deter Russian aggression. Sanctions on Russian exports remain a key upside risk for crude oil markets. 

• USD/CAD witnessed some selling on Friday and retreated further from the two-month high.
• The set-up still favours bullish trades and supports prospects for the emergence of dip-buying.
• A subsequent decline could find decent support near the 1.2725-20 area and remain limited.

The USD witnessed some selling heading into the early North American session and dragged the USD/CAD pair to a fresh daily low, around the 1.2765 region in the last hour.

The global risk sentiment got a minor lift amid reports that Russia is reportedly ready to send a delegation to Minsk for talks with Ukraine. This, in turn, dented the greenback's safe-haven status and exerted some downward pressure on the USD/CAD pair.

The downside, however, remained limited, at least for now, amid subdued price moves around crude oil prices, which failed to provide any meaningful boost to the commodity-linked loonie. This, in turn, warrants some caution for aggressive bearish traders.

From a technical perspective, the overnight sharp move up to the two-month high confirmed a near-term bullish breakout through a four-week-old trading range. This, along with the fact that technical indicators on the daily chart have just started gaining positive traction, supports prospects for the emergence of some dip-buying around the USD/CAD pair.

Hence, any subsequent decline towards the 1.2730-1.2725 region could still be seen as an opportunity to initiate fresh bullish positions and remain limited near the 1.2700 mark. The next relevant support is pegged near the lower end of the aforementioned trading range, around mid-1.2600s, which should act as a strong near-term base for the USD/CAD pair.

On the flip side, the 1.2800-1.2810 region now seems to act as an immediate resistance. Sustained strength beyond Some follow-through buying beyond the 1.2825-1.2830 area has the potential to push the USD/CAD pair back towards the overnight swing high, around the 1.2875-1.2880 zone. The momentum could further get extended towards reclaiming the 1.2900 mark.

USD/CAD daily chart

Technical levels to watch

• DXY comes under some pressure around the 97.00 level.
• Further upside could retest the 2022 high at 97.73.

DXY fades Thursday’s climb to new cycle tops in the 97.70/75 band and returns to the 97.00 neighbourhood at the end of the week.

Bets for the continuation of the upside remain on the rise in the near term, with the next barrier at the 2022 high at 97.73 (February 24) just ahead of the 97.80 level (June 30 2020 high).

The short-term constructive stance remains supported by the 5-month line, today near 95.50, while the outlook for the dollar is seen as positive above the 200-day SMA at 93.89 in the longer run.

DXY daily chart

Russia is reportedly ready to send a delegation to Minsk for talks with Ukraine, reported Russia's state-controlled RIA. Any such Russian delegation could comprise of defense and foreign ministry officials, RIA reported citing the Kremlin. The Kremlin reportedly added that it considers Ukraine's "demilitarisation" a critical part of Ukraine's neutrality.  

• Gold traders are taking a breather on Friday after Thursday’s big moves, with prices near flat in the $1900 area.
• Focus remains on the Russia/Ukraine war as fighting intensifies and the West mulls further sanctions.
• Upcoming US data will also be closely watched for any implications for Fed tightening expectations.

Even as the fighting between Russian and Ukrainian military forces all across Ukraine intensifies, market participants appear to be taking somewhat of a breather on Friday after an exhaustive last few days of extreme volatility. That seems to be the case in spot gold (XAU/USD) markets, anyway, with prices currently trading just above the $1900 level and near the mid-point of Friday’s $1890-$1920ish ranges so far. That compares to Thursday’s near $100 intra-day swing from highs to lows after XAU/USD pulled back abruptly from multi-month highs in the $1970s to sub-$1880 lows.

Upcoming US Core PCE inflation data for January might stir things up a little if it surprises to the upside and challenges the recent shift in the market’s view towards the March Fed meeting. In wake of the rise of geopolitical uncertainty in Europe and subsequently cautious commentary from some Fed policymakers on Thursday, markets have taken the view that a 50bps rate hike next month is very unlikely. However, influential Fed Board of Governors member Christopher Waller said on Friday that he wanted to see 100bps of tightening by the middle of the year (endorsing James Bullard’s view) and that there is a strong case for a 50bps March hike.

Even if hot US inflation does restoke Fed tightening bets somewhat, thus perhaps exerting putting upside pressure on US yields and on the US dollar, gold seems likely to continue to be supported by geopolitical risk premia for now. Goldman Sachs said on Friday that the gold rally has much further to go and that if demand for gold ETFs picks up sufficiently, prices could hit fresh record highs in the $2300s.

The EU is planning to freeze the assets of Russian President Vladimir Putin and Foreign Minister Sergey Lavrov under a sanctions package expected to be pushed through this Friday, the FT reported citing people familiar with the matter. EU Foreign Ministers are planning to approve the sanctions this afternoon, the FT reported, alongside additional measures against Russian banks and industry. The report noted, however, that Putin and Lavrov would not be subject to a travel ban, which the FT said underlines the EU's willingness to keep symbolic diplomatic possibilities open. 

• AUD/USD caught fresh bids on Friday and built on the overnight bounce from the two-week low.
• The Russia-Ukraine crisis underpinned the safe-haven USD and capped the perceived riskier aussie.
• The focus will remain on the outcome of the NATO summit and the incoming geopolitical headlines.

The AUD/USD pair maintained its strong bid tone heading into the North American session and was last seen trading near the daily high, just above the 0.7200 mark.

The pair regained positive traction on the last day of the week amid some technical buying following the overnight strong rebound from the 0.7100-0.7090 static support. Apart from this, the uptick lacked any obvious fundamental catalyst and remained capped amid the worsening situation in Ukraine, which acted as a tailwind for the US dollar.

In the latest development, Ukrainian media reported Russian forces have entered the Obolon district, which is approximately 10 km from Kyiv - the capital city. Adding to this, calls to disconnect Russia from the so-called SWIFT global payment system kept investors on the edge and extended support to safe-haven assets, including the buck.

Meanwhile, Russia's Foreign Minister Sergei Lavrov said that they want the Ukrainian people to be independent and have the possibility to freely define their destiny. Lavrov further added that Russia will ensure the demilitarisation of Ukraine but sees no possibility of recognising the current Ukrainian government as democratic.

Lavrov also said that Ukrainian President Volodymyr Zelenskiy was lying that he was ready to discuss the neutral status of Ukraine. This dashed hopes for a ceasefire and continued weighing on investors' sentiment, which was evident from the prevalent cautious mood around the equity markets and warrants caution for bullish traders.

Investors now look forward to the outcome of an extraordinary virtual summit of NATO Heads of State and Government. Apart from this, the incoming headlines surrounding the Russia-Ukraine saga will influence the broader market risk sentiment, which, in turn, will influence the USD demand and provide some impetus to the AUD/USD pair.

Technical levels to watch

The Mayor of Kyiv Vitali Klitscho on Friday said that the city had entered into a defensive phase, according to Reuters. Russian press citing Russia's Defense Ministry subsequently reported that the Russian military has blocked off the city of Kyiv from the West. The Russian Defense Ministry reiterated its statement that it will not strike residential areas of Kyiv. 

• USD/CHF turned positive for the second straight day amid renewed USD buying interest.
• The Russia-Ukraine war benefitted the greenback’s status as the global reserve currency.
• Friday’s US macro releases might do little to influence or provide any impetus to the pair.

The USD/CHF pair held on to its modest intraday gains through the mid-European session and was last seen trading near the daily high, around the 0.9260 region.

Following the overnight pullback from the two-week high, the USD/CHF pair attracted fresh buying near the 0.9240-0.9235 region on Friday and was supported by reviving US dollar demand. The market sentiment remains jittery amid worries about the worsening situation in Ukraine. This, in turn, continued benefitting the greenback's status as the global reserve currency and acted as a tailwind for the major.

In the latest development, Ukrainian media reported Russian forces have entered the Obolon district, which is approximately 10 km from Kyiv - the capital city. Adding to this, gunfire was heard in Kyiv’s historic city centre. There were also mentions of Russian air missiles being spotted in the north of Kyiv. This, along with calls to disconnect Russia from the so-called SWIFT global payment system, kept investors on the edge.

This was seen as a key factor that pushed the USD/CHF pair into the positive territory for the second successive day - also the third in the previous four. Despite the intraday positive move of nearly 40 pips, spot prices remain well below the overnight swing high, warranting some caution before placing aggressive bullish bets. Nevertheless, the incoming geopolitical headlines will continue to play a key role in driving the pair.

Friday's economic docket highlights the release of the Fed's preferred inflation gauge - the Core PCE Price Index - and Durable Goods Orders, due during the early North American session. The data, however, might do little to influence the USD price dynamics or provide any meaningful impetus to the USD/CHF pair. Hence, the market focus will remain glued to fresh developments surrounding the Russia-Ukraine saga.

Technical levels to watch

• EUR/JPY remains well under pressure around 129.00.
• Next on the downside emerges the 2022 low at 127.90.

EUR/JPY extends the weekly bearishness and revisits the 128.70 region, where some initial contention has emerged so far.

Further losses in EUR/JPY remains well in the pipeline in light of the recent price action and following the risk aversion scenario. That said, a deeper pullback could initially visit the 2022 low at 127.91 (February 24) followed by the December 2021 low in the mid-127.00s (December 20).

Further downside in the cross is likely below the 2-month line near 128.90. On the longer term, the outlook for the cross is seen as negative while below the 200-day SMA, today at 130.34.

EUR/JPY daily chart

Bank of England policymaker Catherine Mann said on Friday that there is very little in the data that shows a reduction in inflation expectations, except in the gilt market, as reported by Reuters.

Additional takeaways

"MPC had differences over how to assess whether the economy had recovered from COVID."

"MPC also differed on weight to put on the level of employment versus participation rates, how to assess inflation expectations."

"It would be dangerous to conclude that covid has led to permanent changes in UK labour force."

"Rise in energy prices has been a surprise to central banks, geopolitical issues at play."

"Much of UK goods price inflation has come from abroad, not something boe could predict."

"QE has created a lot of liquidity, not had a big impact on the real economy."

"QE has increasingly been absorbed by the financial sector, not transmitted on to the real economy."

"If inflation dynamics of 2021 are repeated in 2022, inflation will exceed boe forecasts."

"I want to emphasise my focus on inflation expectations."

Market reaction

The GBP/USD pair largely ignored these comments and was last seen posting small daily gains at 1.3385.

Ukrainian President Volodymyr Zelenskyy said on Friday that Europe can still stop the Russian aggression against Ukraine if it acts swiftly, as reported by Reuters.

Additional takeaways

"Russian assault is like a repeat of World War Two."

"Europe is slow to help Ukraine while Russian tanks attack people."

"Calling on European citizens to protest to force their governments to more decisive action."

Market reaction

Markets remain relatively quiet following these remarks. As of writing, the EUR/USD pair was down 0.13% on a daily basis at 1.1175.

European Central Bank chief economist Philip Lane told policymakers on Friday that the Russia-Ukraine was could shave 0.3%-0.4% off the eurozone GDP in the middle scenario, Reuters reported, citing people familiar with the matter.

Additional takeaways

"Presented severe scenario where GDP is cut by close to 1%."

"The mild scenario showed no impact, now seen as unlikely."

"These were 'back-of-envelope' preliminary calculations, mostly derived from commodity prices."

Told meeting there would be a significant increase to 2022 inflation forecast."

"Hinted at inflation below target at end of horizon."

Market action

The shared currency stays on the back foot on Friday and the EUR/USD pair was last seen losing 0.17% on a daily basis at 1.1172.

Economist at UOB Group Ho Woei Chen, CFA, reviews the latest interest rate decision by the BoK.

Key Takeaways

“In line with market consensus, the Bank of Korea (BOK) kept its benchmark base rate unchanged at 1.25% at its Feb meeting.”

“The BOK officially raised its 2022 inflation forecast to 3.1% from 2.0% after warning in Jan that inflation could exceed the path projected in Nov 2021. The sharply higher inflation outlook underpins expectation that the BOK will resume its rate normalisation in Apr/May.”

“After three rate hikes, we think the BOK can afford to wait and see how other global central banks respond to the Russia-Ukraine crisis and the impact on already high energy prices while also assessing the risks from record high COVID-19 infections at home. Nevertheless, based on expectation of a higher inflation trajectory this year, we maintain our forecast for another 50 bps interest rate hike, likely with 25 bps each in 2Q and 3Q to bring the base rate to 1.75% by end-2022.”

Russia's Foreign Minister Sergei Lavrov claimed on Friday that Ukrainian President Zelenskyy was lying when he said he was ready to discuss the neutral status of Ukraine, Reuters reported, citing Interfax news agency.

Additional takeaways

"Russia does not see the possibility to recognise the current government in Ukraine as democratic."

"No one is planning to occupy Ukraine."

"Russia wants Ukrainian people to be independent."

"Russia will ensure demilitarisation of Ukraine."

Market reaction

Investors remain cautious following these remarks and the US Dollar Index stays in the positive territory above 97.00.

EUR/CHF tentatively violated the low of January forming a daily hammer at 1.0279. Economists at Société Générale expect the pair to bounce towards the 76.4% retracement of recent pullback at 1.0530.

EUR/CHF forms a daily hammer

“The daily hammer pattern denotes downside momentum has got arrested.” 

“A bounce is likely, however, 1.0530, the 76.4% retracement of recent pullback should cap.”

“Next downside projections are at 1.0265 and 1.0160.”

Gold price climbed for a time to $1,975 on the back of the escalating Russia-Ukraine conflict, putting it at its highest level since September 2020. If the situation worsens, the yellow metal would see renewed upside pressure, strategists at Commerzbank report.

Gold profits from falling bond yields and slump on stock markets

“Gold is in considerable demand as a safe haven in the current environment, as also evidenced by further ETF inflows. In addition, gold has been profiting from falling bond yields and a slump on many stock markets – both of which indicate high-risk aversion among market participants.” 

“We believe it possible that the gold price will see a renewed upswing in the next few days – especially if the situation in Ukraine escalates any further.”

See – Gold Price Forecast: XAU/USD to push higher towards $2,000 protracted escalation in Ukraine – UBS

• GBP/JPY turned lower for the third successive day amid reviving demand for the safe-haven JPY.
• Escalating Russia-Ukraine conflict kept investors on the edge and benefitted safe-haven assets.
• Modest USD strength weighed on the GBP, which further contributed to the intraday selling bias.

The GBP/JPY cross witnessed some selling during the first half of the European session and dropped to a fresh daily low, around the 154.15 region in the last hour.

The cross gained some positive traction during the early part of the trading on Friday, albeit struggled to capitalize on the move and met with a fresh supply near the 154.80 region. The worsening situation in Ukraine continued weighing on investors' sentiment, which, in turn, benefitted the safe-haven Japanese yen and acted as a headwind for the GBP/JPY cross.

In the latest developments, reports indicated that Russian forces have entered the Obolon district in Kyiv. According to the Kyiv Independent, the Ukrainian military is fighting off the Russian troops and there are also mentions of Russian air missiles spotted in north of Kyiv. Adding to this, calls to disconnect Russia from the SWIFT kept investors on the edge.

How is Russian-Ukraine war impacting financial markets? Follow our live coverage updates!

Meanwhile, reviving safe-haven demand underpinned the US dollar and attracted fresh selling around the British pound. This was seen as another factor that dragged the GBP/JPY cross into the negative territory for the third successive day. A subsequent slide below the 154.00 round figure will set the stage for a slide towards challenging the 200-day SMA support.

Nevertheless, the GBP/JPY cross seems all set to post heavy weekly losses and remains at the mercy of the incoming geopolitical headlines. Hence, the focus will be on the outcome of the NATO summit, which might influence the broader market risk sentiment. This, in turn, would drive demand for the safe-haven JPY and provide some meaningful impetus to the GBP/JPY cross.

Technical levels to watch

USD/INR is once again challenging the graphical hurdle of 75.70. Above here, the pair will target December levels of 76.40, economists at Société Générale report.

75.70 is next resistance

“The 75.70 resistance must be overcome for denoting extension in the bounce towards December levels of 76.40.”

“The 200-DMA at 74.30 is near-term support.”

• Gold price remains bid amid mounting Russia-Ukraine tensions.
• Risk-aversion returns as Russia closes in on Kyiv, US-NATO meeting eyed.
• Gold Price Forecast: A win-win amid Russia-Ukraine war, inflation woes, $2000 still eyed?

Gold price braces for yet another turbulent day, with volatility to remain through the roof amid incoming updates on the Russia-Ukraine war. Russia is reportedly ready for taking control of Kyiv, the capital of Ukraine, with the ground forces closing in. Further, Moscow is preparing retaliatory sanctions against the West. Against this backdrop, gold price will continue to remain at the mercy of the risk sentiment driven by the Russia-Ukraine geopolitical developments.

Read: Markets quake on Russian invasion of Ukraine but quickly discover Realpolitik

Gold Price: Key levels to watch

The Technical Confluences Detector shows that gold price needs to recapture the $1,917 critical hurdle on a sustained basis to resume the uptrend.

That level is the convergence of the Fibonacci 38.2% one-day and pivot point one-month R3.

Gold bulls will then face an immediate barrier at $1,920, which is the pivot point one-week R1.

Acceptance above the latter will trigger a fresh upswing towards $1,931, the Bollinger Band one-day Upper.

Ahead of that the SMA10 four-hour at $1,921 could challenge the renewed upside.           

On the downside, the immediate cap is seen at $1,908, the SMA5 four-hour, below which a dense cluster of healthy support levels between $1,902-$1,900 will come into play.

Further down, the SMA50 four-hour at $1,892 will get probed, as bears flex their muscles towards the Fibonacci 23.6% one-week at $1,890.

Here is how it looks on the tool

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

GBP/USD fell to its lowest level since late December at 1.3271 on Thursday. While above 1.3250, cable is expected to enjoy a rebound towards 1.3565 and the recent peak of 1.3644, economists at Société Générale report.

Bounce expected

“Projections at 1.3250 is first support. Defending this can lead to a bounce towards 1.3565 and recent peak of 1.3644.”

“December low of 1.3160/1.3130 is crucial support.”

The Russian ruble faces depreciation pressure and the Russian central bank has started interventions in the foreign exchange market. Analysts at Nordea think the pair could climb even beyond the 100 level.

Russian central bank to intervene in the FX market

“We expect the ruble to face depreciation pressure in the coming weeks, while the central bank will keep intervening in the FX markets.”

“Earlier, we estimated that in a ‘clear escalation’ scenario EUR/RUB could stabilise at a level around 95 after the initial shock. The current situation is worse than we assumed in our scenario, and as a result, EUR/RUB is expected to climb towards 100 and even above that but the uncertainty is extremely high.”

GBP/USD has lost its recovery momentum in the early European session. Sellers are likely to retain control unless the market mood improves ahead of the weekend, FXStreet’s Eren Sengezer reports.

GBP/USD to stay on the back foot

“A significant positive shift risk sentiment is unlikely to be witnessed in the short-term and GBP/USD recovery attempts should remain as technical corrections.”

“Static support seems to have formed at 1.3360. In case buyers give up on this level, GBP/USD could extend its slide toward 1.3300 (psychological level) and 1.3280 (static level, multi-month low).”

“On the upside, cable could extend its recovery if it manages to rise above 1.3420 (static level) and start using it as support. In that case, 1.3500 (psychological level) aligns as the next bullish target.”

EUR/USD remains offered and breaks below 1.1200. Economists at Société Générale expect the pair to suffer additional losses on a break under 1.1120.

Descending trend line at 1.1330/1.1345 to cap bounces

“A bounce is not ruled out, however, a descending trend line at 1.1330/1.1345 could cap. Crossing this would be essential for a retest of 1.1485.”

“In the event 1.1120 gets violated, there would be a risk of next leg of downtrend towards projections of 1.1080/1.1040.”

• USD/CAD attracted some dip-buying on Friday amid renewed USD strength.
• An escalation in the Russia-Ukraine conflict benefitted the safe-haven USD.
• A pullback in oil prices undermined the loonie and further extended support.

The USD/CAD pair reversed intraday losses and climbed to the top end of its daily trading range, back above the 1.2800 mark during the early part of the European session.

Following the overnight pullback from the two-month high and an early downtick on Friday, the USD/CAD pair attracted fresh buying near the 1.2770 region and was supported by renewed US dollar strength. The worsening situation in Ukraine. This was seen as a key factor that continued acting as a tailwind for the safe-haven greenback and assisted the pair to regain some traction.

In the latest developments, reports indicated that Russian forces have entered the Obolon district in Kyiv. According to the Kyiv Independent, the Ukrainian military is fighting off the Russian troops and there are also mentions of Russian air missiles spotted in north of Kyiv. This, in turn, kept investors on the edge and kept a lid on the early optimistic move in the markets.

Apart from this, the intraday pullback in crude oil prices undermined the commodity-linked loonie and provided modest lift to the USD/CAD pair. The intraday uptick, however, lacked follow-through buying hopes for a likely Russia-Ukraine ceasefire. Hence, the market focus will remain on the outcome of the NATO summit and fresh developments surrounding the Russia-Ukraine saga.

Friday's US economic docket highlights the release of the Fed's preferred inflation gauge - the Core PCE Price Index - and Durable Goods Orders, due later during the early North American session. The data, however, might do little to influence the USD or provide any meaningful impetus, leaving the USD/CAD pair at the mercy of the incoming geopolitical headlines.

Technical levels to watch

• EUR/USD adds to recent losses in the sub-1.1200 area.
• The dollar remains strong and weighs on the pair.
• ECB Lagarde, US PCE next of importance in the calendar.

Sellers remain in control of the shared currency and drag EUR/USD back below 1.1200 the figure at the end of the week.

EUR/USD looks to Russia-Ukraine

EUR/USD is down for the third session in a row on Friday, always on the back of the solid demand for the greenback, which remains in turn underpinned by the persistent risk aversion.

Indeed, investors keep favouring the “flight-to-safety” sentiment at the end of the week against the backdrop of further deterioration in the Russia-Ukraine front.

The move lower in spot came in tandem with renewed weakness in yields of the key 10y German Bund, now gyrating around the 0.16% area as the demand for bonds remain firm.

In the domestic docket, final Germany GDP Growth Rate showed the economy expanded 1.8% YoY in Q4 and contracted 0.3% inter-quarter. In addition, ECB’s M3 Money Supply expanded 6.4% in the year to January. Later in the session, the final EMU Consumer Confidence is due ahead of the speech by ECB’s Lagarde.

Across the pond, PCE and Core PCE are due followed by Durable Goods Orders, Personal Income/Spending and the final Consumer Sentiment gauge.

What to look for around EUR

EUR/USD continues to look to the geopolitical scenario and risk appetite trends for near-term direction. On this, the recent deterioration of the Russia-Ukraine front is expected to keep the pair under pressure amidst solid risk-off sentiment and demand for the greenback. In the meantime, bouts of strength in the pair should remain underpinned by speculation of a potential interest rate hike by the ECB probably sooner than many anticipate, higher German yields, persevering elevated inflation and a decent pace of the economic activity and auspicious results from key fundamentals in the region. The threat to this view, as usual, comes from the Fed and a potential tighter-than-expected start of the normalization of its monetary conditions.

Key events in the euro area this week: 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 losing 0.14% at 1.1175 and faces the next up barrier at 1.1323 (55-day SMA) followed by 1.1390 (weekly high Feb.21) and finally 1.1395 (weekly high Feb.16). On the other hand, a drop below 1.1106 (2022 low Feb.24) would target 1.1100 (round level) en route to 1.1000 (round level).

Russian Foreign Ministry said in a statement, the country’s Foreign Minister Sergei Lavrov will hold talks with officials from the self-proclaimed Donetsk and Luhansk republics of eastern Ukraine on Friday.

Key takeaways

“Both sides are likely to discuss Russian military operations in Ukraine, as well as the opening of the embassies of the Donetsk People's Republic and the Luhansk People's Republic in Moscow.“

“They will also discuss the opening of Russian diplomatic outposts in the two regions.”

Russian President Vladimir Putin signed decrees on Monday to recognize the two breakaway regions as independent states before ordering a full-blown invasion of Ukraine.

Related reads

S&P 500 futures drop over 1% as Russian forces enter the town of Vorzel, Obolon in Kyiv

UK and France say cutting off Russia from SWIFT remains on the table

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest inflation figures in Malaysia.

Key Takeaways

“Headline inflation moderated for the second straight month to 2.3% y/y in Jan (from 3.2% in Dec 2021). It matched our estimate but undershot Bloomberg consensus’ 2.5%.”

“The moderation in Jan inflation was purely a result of year-ago high base effects fading in electricity and transport components. This partially cushioned the impact of price gains across most goods and services, particularly food & beverages; furnishing, household equipment & maintenance; recreation services & culture; restaurants & hotels; as well as education.”

“Despite the second month of slower inflation reading last month, risks to inflation are still tilted to the upside. Among key upside risks are global supply chain disruptions, escalating commodity prices, higher wages due to post-pandemic labour shortages and revised national minimum wage, expiry of government’s price control schemes, and potential subsidy rationalization programs. We maintain our 2022 full-year inflation forecast at 3.0% (2021: 2.5%).”

• USD/RUB fades the spike to the 90.00 region recorded on Thursday.
• Focus remains largely on the Russian invasion of Ukraine.
• The MOEX Index rebounds sharply following Thursday’s collapse.

The Russian ruble regains part of the ground lost on Thursday and now drags USD/RUB to the vicinity of the 83.00 region at the end of the week.

USD/RUB looks to geopolitics

After clinching all-time highs around 90.00 soon after Russia started its attack on Ukraine, USD/RUB sparked a corrective downside and managed to close Thursday’s session around 84.30.

The move lower in the pair came in response to FX intervention by the Bank of Russia, which decided to step in to prevent a potential collapse of the currency and stabilize the situation in the financial markets. In addition, the central bank banned short sales in the exchange and OTC markets.

Furthermore, Russian stocks measured by the MOEX index opened Friday’s session with important gains – nearly 17% at the time of writing – therefore trimming part of the sharp pullback witnessed on the onset of the invasion.

In the domestic cash markets, yields of the 10y benchmark bond drop to the 12.60% region following Thursday’s bull run to the 14.00% zone, an area last traded back in January 2015.

It seems both RUB and Russian equities so far manage to weather quite well the recent sanctions by the EU, the UK and the US.

USD/RUB levels to watch

So far, the pair is losing 0.65% at 83.82 and faces the next hurdle at 86.43 (high Feb.25) followed by 90.00 (all-time high Feb.23) and then 100.00 (round level). On the downside, a breach of 80.41 (monthly high Jan.26) would aim for 76.18 (55-day SMA) and finally 74.25 (monthly low Feb.10).

Washington Post (WaPo) reports, citing Kyiv's mayor on Friday, “an air raid siren went off about 7 a.m. local time and at least one residential building in the capital caught fire after being hit by rocket debris.”

This comes after multiple explosions were heard earlier in the day.

A senior Ukrainian defense official said Russian forces were near the town of Vorzel, some 20 miles to Kyiv's northwest, per WaPo.

There are reports also doing the round by the Ukrainian media that Russia’s forces have entered the Obolon district in Kyiv, which is approximately 10 km from central Kyiv.

The risk sentiment is turning sour once again on these headlines, with the S&P 500 futures losing 1.15% on the day. AUD/USD is trimming gains below 0.7200 while gold price holding onto its latest gains around $1,913.

Adding to the damp mood, Reuters reports that Russia has banned British airlines from landing at its airports or crossing its airspace, citing the country’s civil aviation regulator.

In response to Russia’s closing its airspace for UK, British Defense Minister Robert Wallace said that the “Russian restrictions on the UK airlines are a retaliation for our moves against Aeroflot.”

• GBP/USD surrendered a major part of its intraday gains amid the emergence of fresh USD buying.
• The worsening situation in Ukraine weighed on the sentiment and benefitted the safe-haven buck.
• The focus remains on fresh developments surrounding the Russia-Ukraine saga and NATO summit.

The GBP/USD pair retreated over 50 pips from the daily high and dropped back below the 1.3400 round-figure mark during the early part of the European session.

The pair attracted some buying on the last day of the week and built on the overnight solid rebound of around 100 pips from the two-month low, around the 1.3270 region. The intraday move up, however, ran out of steam ahead of mid-1.3400s amid the emergence of some US dollar dip-buying, bolstered by reports that Russian forces have entered the Obolon district in Kyiv.

According to the Kyiv Independent, the Ukrainian military is fighting off the Russian troops and there are also mentions of Russian air missiles spotted in north of Kyiv. The incoming headlines surrounding the Russia-Ukraine saga kept investors on edge, which, in turn, acted as a tailwind for the safe-haven greenback and attracted fresh selling around the GBP/USD pair.

Adding to this, calls to disconnect Russia from the so-called SWIFT global payment system should keep a lid on any optimistic move in the markets. French Minister of the Economy, Finance and the Recovery - Bruno Le Maire - said that cutting off Russia from SWIFT remains on the table but as a last resort. This favours the USD bulls, which should weigh on the GBP/USD pair.

Market participants now look forward to the US economic docket, highlighting the release of the Fed's preferred inflation gauge - the core PCE Price Index - and Durable Goods Orders. The data, however, might do little to influence the USD price dynamics or provide any impetus to the GBP/USD pair as the focus remains on developments surrounding the Russia-Ukraine saga.

Technical levels to watch

The outlook for USD/CNH remains mixed and the pair is seen extending the 6.3050-6.3450 range in the next weeks, commented FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected USD to ‘consolidate and trade between 6.3050 and 6.3260’ yesterday. USD subsequently dipped to 6.3062, rebounded to 6.3348 before easing off to close at 6.3239 (+0.17%). The movement is still viewed as part of a consolidation phase and USD is expected to trade within a range of 6.3080/6.3350.”

Next 1-3 weeks: “Yesterday (24 Feb, spot at 6.3230), we highlighted that downward momentum is beginning to build again but USD has to close below 6.3050 before a sustained decline is likely. USD subsequently dropped to 6.3062 before rebounding to take out our ‘strong resistance’ level at 6.3330 (high of 6.3348). The choppy price actions have resulted in a mixed outlook and USD could trade between 6.3050 and 6.3450 for now.”

• DXY retreats from Thursday’s cycle highs near 97.70.
• Global attention remains on the events in Ukraine.
• PCE, Durable Goods Orders, U-Mich Index next of note in the docket.

The greenback, in terms of the US Dollar Index (DXY), trades without a clear direction around the 97.00 neighbourhood at the end of the week.

US Dollar Index focuses on geopolitics, risk trends

Following new cycle highs near 97.80 on Thursday, the index sparked a corrective downside and now struggles for direction in the 97.00 zone on Friday.

The acute climb of the greenback to levels last seen in June 2020 came in response to the violent resurgence of the risk aversion sentiment after Russia attacked Ukraine early on Thursday.

US yields, in the meantime, trade with modest losses on Friday after managing to erode losses on Thursday on the back of increasing inflows to safer assets like bonds.

The dollar’s pullback from recent tops was also sponsored by Fedspeak now supportive of a smaller move on rates at the Fed’s March meeting and a more gradual start of both the lift-off in rates and QT in light of the ongoing geopolitical concerns. On this, and according to CME Group’s FedWatch Tool, the probability of a 25 bps interest rate hike is now at nearly 80%, similar to levels recorded a week ago.

Later in the US data space, inflation figures tracked by the PCE will be in the limelight seconded by Durable Goods Orders, Pending Home Sales, Personal Income/Spending and the final print of the Consumer Sentiment for the current month.

What to look for around USD

The appetite for safer assets continues to bolster the dollar and keeps the index on the positive footing on the back of the deterioration of the geopolitical scenario. The constructive view in the buck remains underpinned by the current elevated inflation narrative and the probability of a more aggressive start of the Fed’s normalization of its monetary conditions. In the longer run, 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: 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.

US Dollar Index relevant levels

Now, the index is gaining 0.08% at 97.12 and a break above 97.73 (2022 high Feb.24) would open the door to 97.80 (high Jun.30 2020) and finally 98.00 (round level). On the flip side, the next down barrier emerges at 96.03 (55-day SMA) followed by 95.67 (weekly low Feb.16) and then 95.17 (weekly low Feb.10).

According to France's Finance Minister Bruno Le Maire, cutting off Russia from SWIFT remains on the table but as a last resort.

Meanwhile, the UK Defence Minister Robert Wallace said, “we'd like to cut Russia off from SWIFT.”

“It is difficult as "not every country wants them out,” Wallace added.

Market reaction

The risk sentiment is once again taking a hit on reports that Russia’s forces have entered the Obolon district in Kyiv.

The S&P 500 futures are down 1%, as of writing while gold price is holding the bounce around $1,913.

The confirmation of a full invasion of Ukraine sparked meaningful moves in FX. EUR/USD posted one of its largest one-day declines in several months as neared the 1.1100 level. Economists at MUFG believe that additional losses towards 1.10 are still feasible in the coming days.

Non-oil Europe suffers on Russia-Ukraine uncertainty

“Usually, the euro tends to be a better performer amongst G10 currencies during times of financial market risk-off events given the large current account surplus. But we are not seeing that now.”

“The rebound in risk sentiment following the sanctions announcements has resulted in safe-haven currencies weakening back. But the clearest pattern is the fact that European, non-oil related currencies have underperformed. We expect this to continue with a breach of 1.1000 plausible.”

Russia-Ukraine conflict has escalated further. Geopolitical tensions and global market uncertainties should see traditional safe-haven currencies strengthening. Yet, the risks of higher energy prices and spikes in other commodities prices may have different FX implications, economists at HSBC report.

Traditional safe-haven currencies should strengthen given the geopolitical stress

“Traditional safe-haven currencies – the USD, JPY and CHF – outperformed initially, and we expect this to continue if developments intensify. The USD should also benefit if there are concerns that higher energy prices cause a more acute slowing in the global economy.”

“Currencies that are more sensitive to heightened risk aversion (such as the AUD, NOK and NZD) should weaken. However, uncertainty is compounded by the impact of these events on energy prices and, hence, there should be some differentiation. In G10 FX, the CAD, NOK, and even the AUD may be able to withstand the pressure a little better than in a traditional risk-off move.”

“The escalation in Ukraine and related uncertainty about next steps could still see the EUR weaken versus the USD and JPY. The geographical proximity of the region and Europe’s reliance on commodity imports – particularly gas – are both sources of vulnerability.”

“The KRW tends to be more sensitive to heightened risk aversion and other currencies that are exposed to large net oil deficits, like the INR, could also weaken. We expect the RMB and SGD to be the most resilient in the region.”

Gold has rallied to $1,971/oz. In order to build a portfolio robust enough to navigate the Ukraine crisis, economists at UBS see holding the yellow metal as a key action.

Using commodities as a geopolitical hedge

“Amid the risk of supply disruptions, we think broad commodities can be an effective geopolitical hedge for portfolios, as well as offering an attractive source of returns in an environment of accelerating growth, persistent inflation, and higher rates.”

“We think a protracted escalation could push gold prices above $2,000/oz.”

• AUD/USD gained strong positive traction on Friday and built on the overnight solid rebound.
• A recovery in the risk sentiment undermined the safe-haven USD and extended some support.
• Fears of a further escalation in the Russia-Ukraine conflict might cap the perceived riskier aussie.

The AUD/USD pair extended its steady intraday ascent and climbed to a fresh daily high, back above the 0.7200 mark during the early European session.

Following the previous day's slump and the late rebound from sub-0.7100 levels, the AUD/USD pair caught fresh bids on Friday and was supported by a broad-based US dollar weakness. The market nervousness over the situation in Ukraine eased, at least for now, amid hopes for a likely Russia-Ukraine ceasefire. This, in turn, weighed on the safe-haven US dollar and provided a goodish lift to the perceived riskier aussie.

Russian President's press secretary Dmitry Peskov said on Thursday that Putin was ready to talk with Ukrainian President Volodymyr Zelenskyy if the latter agrees to compromise on Russia’s red line issues. Apart from this, the fact that the new economic sanctions imposed on Russia were not as harsh as feared, further boosted investors' confidence. This was evident from a generally positive tone around the global equity markets.

Signs of stability in the financial markets dragged the USD away from the highest level since June 2020 touched on Thursday and extended support to the AUD/USD pair. That said, the risk-off a further escalation in the geopolitical risks would keep investors' on the edge and act as a tailwind for the buck. This, in turn, warrants some caution before positioning for any further appreciating move for the AUD/USD pair, at least for now.

Market participants now look forward to the US economic docket, highlighting the release of the Fed's preferred inflation gauge - the core PCE Price Index - and Durable Goods Orders. The data, however, might do little to influence the USD price dynamics or provide any meaningful impetus to the AUD/USD pair. The market focus remains glued to developments surrounding the Russia-Ukraine saga and the outcome of an extraordinary NATO summit.

Technical levels to watch

The world remains transfixed by war in Europe. The dollar has understandably been favoured this week, and economists at ING expect the US Dollar Index (DXY) to retest its highest level since June 2020 at 97.70.

Dollar liquidity will remain favoured

“Given the uncertainty, we suspect investors will want to hold on tight to their dollars. 

“FOMC members still seem happy to speculate over a 25bp or 50bp rate hike at the 16 March meeting. Here, the pricing of the Fed terminal rate (in two years) is just 5bp off its recent highs.”

“We continue to favour the dollar over Europe and favour the DXY returning to yesterday's spike high near 97.70.”

The British pound has actually performed quite well given the heavy sell-off in European equities on Thursday. Economists at ING expect the EURGBP pair to return to the 0.8280/8300 area.

Sterling holding its own

“UK equities are heavily exposed to the Oil and Gas sector, which understandably has come under a lot of pressure given links to Russia.”

“The surge in European gas prices probably means that UK CPI peaks closer to 8% than 7% and will stay higher for longer. That should keep the BoE wary and should market conditions calm – and the focus return to macro-tightening – EUR/GBP should be able to return to the 0.8280/8300 area.”

USD/RUB shot to levels around 90.00 on Thursday. However, interventions on the part of the Russian central bank were able to stop the move so that the pair stabilized in the mid-80s. Nonetheless, Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, warns against believing that long-term interventions will be sufficient to prevent further RUB weakness. 

Are interventions sufficient?

“Liquidity on the RUB market is likely to have been thin yesterday, as nobody knows which Russian banks they will be able to cooperate with in the future, nobody is interested in major exposure to these banks. In an environment such as this, interventions are of course more effective than under normal circumstances. However, this effect will ease once the sanctions lists have been published.”

“Do you remember 2009? As soon as 1/3 of the FX reserves had been used up all FX analysts worldwide started to calculate when the reserves would be used up. The result was a dramatic collapse of the currency. That confirmed the old rule: no matter how high the FX reserves are, a central bank will never be able to defend a fundamentally unjustified exchange rate with the help of interventions.”

“Russian central bank cannot rely exclusively on interventions. Sooner or later (I think sooner) it will have to hike the key rate significantly.”

EUR/USD has staged a rebound after having slumped to its weakest level since June 2020 near 1.1100 on Thursday. Is the euro selloff over already? According to FXStreeet’s Eren Sengezer, it is too early to say whether or not the pair is out of the woods yet as investors gear up for another volatile day amid the ongoing Russia-Ukraine war.

ECB President Lagarde will assess the impact of the Russia-Ukraine war on policy

“Several news outlets report that Russia is planning to make a move toward Kyiv. In that case, the euro could face selling pressure and EUR/USD could turn south. Furthermore, the west could introduce additional sanctions if that were to happen and allow safe-haven flows to dominate the markets ahead of the weekend.”

“A relief rally could sweep the markets if Russia were to agree to hold off the attack and look for a diplomatic solution. As it currently stands, this seems to be a very distant possibility.”

“If Lagarde adopts a hawkish tone by noting that they will prioritize battling inflation, the common currency could stay resilient against the dollar. On the other hand, the euro could come under renewed bearish pressure in case the ECB decides to postpone policy normalization to support the economic activity.” 

According to UOB Group’s FX Strategists, USD/JPY is now seen navigating the 114.80-115.90 range in the next weeks.

Key Quotes

24-hour view: “Yesterday, we highlighted that USD ‘is likely to edge lower even though it is unlikely to challenge the major support at 114.40’. USD subsequently dropped 1 pip below 114.40 (low of 114.39) before staging a surprising sharp advance (high has been 115.69). The advance appears to be running ahead of itself and further USD strength is unlikely. For today, USD is more likely to trade between 115.10 and 115.70.”

Next 1-3 weeks: “In our latest narrative from Tuesday (22 Feb, spot at 114.75), we highlighted that there is room for USD to edge lower but it has to break 114.40 before a more sustained decline can be expected. Yesterday (24 Feb), USD dipped to 114.39 before soaring to a high of 115.69. The breach of our ‘strong resistance’ level at 115.30 indicates that the mild downward pressure has eased. The outlook appears to be neutral now and USD is expected to trade within a range of 114.80/115.90.”

What does Russia’s invasion of Ukraine mean for the Australian dollar? The aussie fell as global risk aversion surged but remains well inside this year’s trading ranges. A range of factors are at play in limiting the impact on the AUD but of course, this could change in coming weeks, economists at Westpac report.

Australia’s key commodity prices continue to lend support

“So Russia’s attack on Ukraine is hurting global risk appetite, most obviously equity prices, a clear negative for the aussie, but is supporting energy and metals prices, bolstering AUD commodity price support. We also need to consider any potential implications for economic growth and inflation, most notably from the jump in energy prices.”

“We forecast AUD/USD to struggle into mid-2022, given the Fed’s expected tightening cycle contrasting to a cautious RBA.” 

“Russia’s attack on Ukraine adds to the headwinds for global risk appetite, reinforcing our 0.70 forecast for June 2022. However, we see RBA tightening from August 2022 and a softer US dollar helping the AUD/USD to 0.73 by year-end.”

Considering preliminary prints from CME Group for natural gas futures markets, open interest increased by around 11.4K contracts on Thursday, reversing the previous daily pullback. In the same direction, volume kept the erratic performance and went up by nearly 130K contracts.

Natural Gas still looks to $5.00

Thursday’s uptick in prices of natural gas was on the back of increasing open interest and volume, favouring extra gains in the very near term and with the immediate target at the $5.00 mark per MMBtu.

• NZD/USD regained positive traction on the last day of the week amid a further USD pullback
• Hopes for a ceasefire undermined the safe-haven USD and benefitted the perceived riskier kiwi.
• The risk of a further escalation in geopolitical tensions might keep a lid on any further gains.

The NZD/USD pair held on to its modest intraday gains through the early European session and was last seen trading near around the 0.6710-0.6715 region, up 0.10% for the day.

The pair built on the overnight late recovery from the weekly low, around 0.6630 area, and gained some positive traction on the last day of the week, though the uptick lacked bullish conviction. The latest optimism over Putin-Zelenskyy meet on likely ceasefire weighed on the safe-haven US dollar. This, in turn, was seen as a key factor that extended some support to the perceived riskier kiwi.

Russian President's press secretary Dmitry Peskov said that Putin was ready to talk with Ukrainian President Volodymyr Zelenskyy if the latter agrees to compromise on Russia’s red line issues. Moreover, reports indicated that Russian troops stopped from advancing in most directions. Traders further took cues from the fact that the new economic sanctions on Russia were not as harsh as feared.

It, however, remains to be seen if the NZD/USD pair is able to capitalize on the move or meets with a fresh supply at higher levels amid the risk of a further escalation in geopolitical tensions. Hence, it will be prudent to wait for strong follow-through buying before confirming that this week's sharp pullback from over one-month high - levels just above the 0.6800 mark - has run its course.

Market participants now look forward to the US economic docket, highlighting the release of the Fed's preferred inflation gauge - the core PCE Price Index - and Durable Goods Orders. The data, however, might do little to influence the USD price dynamics or provide any meaningful impetus to the USD/JPY pair as the market focus remains glued to developments surrounding the Russia-Ukraine saga.

Technical levels to watch

The EUR/USD touched low at 1.1106 before staging a rebound above 1.1200. Still, economists at OCBC Bank believe that another leg lower towards 1.1100 is on the cards.

Potential for further downside

“Headlines will take over for this session, and the risk into next week is further escalation over the weekend. Thus, the pair may not be out of the woods just yet, and a retest of 1.1100 cannot be ruled out.”

“Further out, the question is whether this conflict will upend the ECB’s and other central banks’ playbook, and spark a more structural change in overall trajectory for the pair. We hold our horses for that for now.”

Despite the sharp pullback appears overdone, AUD/USD could still attempt a move to the 0.7050 zone in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “While we expected AUD to decline yesterday, we were of the view that ‘the 0.7175 support is unlikely to come under challenge’. However, AUD plunged to 0.7095 before snapping back up. Oversold conditions suggest that the NY low of 0.7095 is likely to hold and AUD could consolidate within a range of 0.7120/0.7200.”

Next 1-3 weeks: “Yesterday (24 Feb, spot at 0.7220), we highlighted that ‘the risk of a short-term top has increased’. We added, ‘a break of 0.7175 would indicate that the week-long upward pressure has dissipated’. While our view for a short-term top was not wrong, we did not anticipate the price actions where AUD plummeted to 0.7095 and the subsequent sharp rebound. The rapid drop appears to be overdone but there is chance for AUD to test the major support at 0.7050 before a more sustained recovery can be expected. On the upside, a break of 0.7230 (‘strong resistance’ level) would indicate that 0.7050 is not coming into the picture.”

CME Group’s flash data for crude oil futures markets noted open interest rose for the second session in a row on Thursday, this time by around 30K contracts. Volume followed suit and rose by the most since March 9 2020 by around 1.165M contracts.

WTI keeps targeting $100.50

Prices of the barrel of WTI briefly advanced past the key $100.00 mark on Thursday, although it ended the session with modest gains around $93.00. The uptick was in tandem with increasing open interest and volume, which is supportive of the continuation of the uptrend for the time being.

• USD/CHF pares the biggest daily rise in seven weeks.
• Market sentiment improves as Ukraine stops Russia from most directions, US readies NATO meeting.
• Moscow showed readiness to discuss terms for Kyiv’s surrender but Ukraine eyes ceasefire.
• US data, Fedspeak may also entertain traders but nothing more important than geopolitics.

USD/CHF portrays the general US dollar pullback while consolidating the previous day’s heavy gains ahead of Friday’s European session. That said, the quote drops 0.16% intraday to 0.9236 by the press time, following that heaviest rally last seen in early January.

Having witnessed the Russia-led market panic the previous day, traders expect a ceasefire between Kyiv and Moscow, which in turn weighs on the US dollar’s safe-haven demand and the USD/CHF pair as well.

Ukraine President Zelenskiy’s comments that Russian troops stopped from advancing in most directions seemed to have added to the recently upbeat mood. On the same line was the news that US President Joe Biden us up for a virtual meeting to discuss the security situation in and around Ukraine improved mood in the early Asian session. Before that, comments from Russia, like “Moscow is willing to negotiate the terms of Ukraine's surrender,” added to the market’s cautious optimism even as Ukraine President Zelenskyy said they need to discuss a ceasefire with Russia.

While portraying the mood, S&P 500 Futures drop 0.60% and the US Treasury yields remain pressured around 1.95%, which in turn underpin the US Dollar Index (DXY) pullback from a 20-month high.

In addition to the geopolitical updates, the fears that geopolitics will push back Fed from faster rate-hikes may also have weighed on the DXY. However, the latest data from the US and Fedspeak have been upbeat, suggesting a faster trajectory towards monetary policy normalization. As a result, the Fed’s preferred inflation gauge, namely Core PCE Price Index, as well as Durable Goods Orders, for January will also be important for USD/CHF traders to watch for clear direction.

Technical analysis

Unless closing beyond a three-month-old descending trend line, around 0.9285 by the press time, USD/CHF sellers remain directed towards the 200-DMA level of 0.9182.

Gold has regained its bullish momentum early Friday and started to edge higher toward $1,920. Amid the Russia-Ukraine war, the yellow metal could reach the $2,00 level, FXStreet’s Dhwani Mehta reports.

Gold bulls are back in the game

“Gold is likely to remain underpinned going forward, as tensions remain elevated concerning the West, Russia and Ukraine.”

“Gold’s four-hour chart is pointing to further upside risks, as the price recaptures the 21-Simple Moving Average (SMA) at $1,910. The road to recovery will likely extend towards the $1,950 level should the latter hold. The next stop for bulls is seen at the multi-month tops of $1,975, above which a ride towards the $2,000 mark will be inevitable.”

“If the bears fight back control, then a drop back towards the critical 50-SMA support at $1,892 will be inevitable. It’s worth noting that gold price has managed to reclaim ground from the latter on a couple of occasions earlier on.”

In opinion of FX Strategists at UOB Group, further decline in cable should face a tough support around 1.3250 in the near term.

Key Quotes

24-hour view: “We expected GBP to weaken yesterday but we were of the view that ‘any weakness is expected to encounter solid support at 1.3500’. However, GBP not only cracked 1.3500 but also a few other major support levels with ease as it plummeted to 1.3273 before rebounding. Deeply oversold conditions suggest GBP is unlikely to weaken further. For today, GBP is more likely to consolidate and trade between 1.3320 and 1.3450.”

Next 1-3 weeks: “The sudden and sharp plunge in GBP yesterday came as a surprise. The outsized decline appears to be overdone but only a break of 1.3505 (‘strong resistance’ level) would indicate that the current weakness has stabilized. In other words, further GBP weakness is not ruled out. That said, the NY low of 1.3273 is not far above a major support at 1.3250. On the upside, a breach of 1.3505 would indicate that the current weakness has stabilized.”

Open interest in gold futures markets extended the uptrend on Thursday and went up by around 1.4K contracts according to advanced figures from CME Group. In the same line, volume remained choppy and increased by nearly 287K contracts.

Gold could retest $1,880

Thursday’s extreme volatile session in gold prices was amidst rising open interest and volume, leaving the door open to a probable corrective downside to the $1,880 zone (February 24 low) in the very near term.

• USD/JPY witnessed selling on Friday and reversed a part of the overnight strong recovery move.
• The USD moved away from the highest level since June 2020 and exerted downward pressure.
• The cautious optimism could undermine the safe-haven JPY and limit deeper losses for the pair.

The USD/JPY pair remained depressed heading into the European session and was last seen hovering near the lower end of its daily trading range, around the 115.20 region.

The pair struggled to capitalize on the overnight strong intraday recovery of nearly 130 pips from the 114.40 area, or the three-week low and met with a fresh supply on the last day of the week. The downtick could be solely attributed to the ongoing US dollar pullback from the highest level since June 2020, touched in reaction to Russia's invasion of Ukraine on Thursday.

Despite the recent geopolitical developments, the fact that the new economic sanctions on Russia were not as harsh as feared dented the greenback's status as the global reserve currency. This, in turn, was seen as a key factor that exerted some downward pressure on the USD/JPY pair, though the downside seems cushioned amid optimism over Putin-Zelenskyy meet on likely ceasefire.

Russian President's press secretary Dmitry Peskov said that Putin was ready to talk with Ukrainian President Volodymyr Zelenskyy if the latter agrees to compromise on Russia’s red line issues. Moreover, reports indicated that Russian troops have stopped advancing in most directions. This could undermine the safe-haven Japanese yen and lend support to the USD/JPY pair.

That said, the risk of a further escalation in the conflict between Russia and the West over Ukraine should keep investors on edge. The mixed fundamental backdrop warrants some caution for aggressive traders and before positioning for a firm near-term direction for the USD/JPY pair. Hence, the market focus will remain glued to fresh developments surrounding the Russia-Ukraine saga.

Market participants now look forward to the US economic docket, highlighting the release of the Fed's preferred inflation gauge - the core PCE Price Index - and Durable Goods Orders. The data, however, is likely to be overshadowed by geopolitics and do little to influence the USD price dynamics or provide any meaningful impetus to the USD/JPY pair.

Technical levels to watch

Here is what you need to know on Friday, February 25:

Safe-haven flows dominated financial markets for the majority of the day on Thursday and the US Dollar Index (DXY) surged to its highest level since June 2020 at 97.73 before retreating in the late American session. Markets stay relatively quiet early Friday and the DXY extends its corrective slide as investors brace for another turbulent day. The European Commission will release the February sentiment report and the US Bureau of Economic Analysis' Personal Consumption Expenditures Price Index data will be featured in the US economic docket later in the day. Developments surrounding the Russia-Ukraine war, however, are likely to remain as the primary market driver ahead of the weekend.

Following Russia's decision to launch an attack on Ukraine, western nations announced a series of sanctions on Thursday. The EU, the UK and the US refrained from cutting Russia off from the SWIFT system while noting that option was still on the table. Furthermore, the Russian energy sector was also largely left out of sanctions, easing worries over the negative impact of sanctions on the global economy and inflation. Nevertheless, "today will be the hardest day," an adviser for the Ukrainian government said earlier in the day and noted that Russia was planning to use tanks to break through Kyiv. Additionally, Ukrainian President Zelenskyy said sanctions imposed on Russia was not enough. 

Heading into the European session, the DXY was down 0.2% on the day at 96.85, the 10-year US Treasury bond yield was little changed at 1.96% and the barrel of West Texas Intermediate was rising 1.75% at 94.60. US stock index futures, meanwhile, were posting small daily losses, pointing to a cautious market mood.

Markets quake on Russian invasion of Ukraine but quickly discover Realpolitik.

EUR/USD is staging a rebound and trading in the positive territory above 1.1200 after losing more than 200 pips and posting one of its largest one-day declines in several months on Thursday.

GBP/USD fell to its lowest level since late December at 1.3271 on Thursday but managed to erase a portion of its losses. The pair was last seen rising 0.4% on the day at 1.3426.

Gold surged to its strongest level since September 2020 at $1,974 on Thursday but made a dramatic U-turn in the second half of the day to close flat a little above $1,900. XAU/USD has regained its bullish momentum early Friday and started to edge higher toward $1,920.

Although the JPY managed to outperform its risk-sensitive rivals, such as the EUR, GBP and AUD, on Thursday, USD/JPY gained traction on broad-based USD strength and climbed to the 115.50 area. The pair consolidates its gains but holds above 115.00.

Bitcoin fell below $35,000 but capitalized on the risk-reversal in the late American session on Thursday and closed above $38,000. BTC/USD is posting modest gains early Friday but stays below $40,000 for the time being. Ethereum fluctuates in a relatively tight range above $2,600 after recovering from the multi-week low it touched at $2,300 on Thursday.

FX Strategists at UOB Group noted EUR/USD still risks further retracements in the near term.

Key Quotes

24-hour view: “While we expected EUR to weaken yesterday, we did not anticipate the high volatility as EUR nosed-dived to 1.1105 before snapping back up to close at 1.1191 (-1.04%). The sharp bounce from the NY low of 1.1105 appears to have room to extend but a sustained rise above 1.1250 is unlikely (next resistance is at 1.1280). Support is at 1.1170 followed by 1.1130.”

Next 1-3 weeks: “Yesterday (24 Feb, spot at 1.1285), we highlighted that downward momentum has improved and the chance for EUR to move to the next major support at 1.1240 has increased. However, we did not anticipate the manner by which EUR sliced through 1.1240 and plunged to a 21-month low of 1.1105. Despite the subsequent sharp rebound from the low, further EUR weakness is not ruled out. That said, shorter-term conditions are deeply oversold and EUR could trade above 1.1105 for a couple of days first. Only a break of 1.1310 (‘strong resistance’ level was at 1.1360 yesterday) would indicate that the weak phase in EUR that started early last week has run its course. Looking ahead, the next support below 1.1105 is at 1.1080.”

• The S&P futures are eyeing 4,300 amid an improvement in the risk appetite of investors.
• Global equities have rebounded on ceasefire expectations after a likely Putin- Zelenskyy meet.
• The DXY is struggling to overstep 97.00 amid losing appeal of the safe-haven assets.

US equity futures have remained in the grip of bears since February 11, first on mounting tensions over the Russia-Ukraine tussle and later on the escalation in military activities in eastern Ukraine, which further extended to its other cities also.

On Thursday, the S&P 500 index futures hit a low of around 4,100 but later staged a strong reversal as the market participants considered the slump as a value bet to bid, which followed significant longs. This came after the Kremlin Press Secretary Dmitry Sergeyevich Peskov said that, Russian President Vladimir Putin is willing to engage in discussions with the Ukrainian President Volodymyr Zelenskyy, with a focus on obtaining a guarantee of neutral status and the promise of no weapons on its territory, as per the Ommcom news.

The announcement presented a ray of hope that the Ukraine crisis might de-escalate soon and the ongoing slaughter of the Ukrainian economy would pause. Not only did this headline support the risk-sensitive assets but also provided grounds to global equities after a massive sell-off.

The S&P500 futures are trading in a narrow range of 4,254-4,284 and are likely to move north towards 4,300 as the risk appetite of the investors improves further.

However, the risk-off impulse can return if retaliation between Russia and Ukraine expands to other cities.

Meanwhile, the US dollar Index (DXY) is struggling to cross 97.00 amid the ongoing profit-booking in the safe-haven assets after a strong rally. The benchmark 10-year US Treasury yields have slipped near 1.96%.

• USD/CAD sellers attack previous resistance line from early January.
• Failures to cross 78.6% Fibonacci retracement, downbeat RSI favor bears.

USD/CAD remains pressured around an intraday low of 1.2771 as it jostles with resistance-turned-support heading into Friday’s European session.

The Loonie pair rallied to a two-month high the previous day but couldn’t stay much beyond the 78.6% Fibonacci retracement (Fibo.) of December-January downside.

The pullback move, however, battles the previous resistance line, as well as the 61.8% Fibo. level, near 1.2770-65.

Given the quote’s failure to stay beyond the key Fibonacci retracement level and the downward sloping RSI line, not oversold, USD/CAD is likely to decline further.

However, a clear break of 1.2765 becomes necessary before the bears can eye 50% Fibo. level near 1.2700. Following that, the 200-SMA, around 1.2660, will be a tough nut to crack for the USD/CAD sellers.

On the contrary, a clear upside break of the 78.6% Fibonacci retracement level of 1.2866 needs validation from the latest swing high surrounding 1.2880 to direct the USD/CAD bulls towards December 2021 top, close to 1.2965.

During the run-up, the 1.2900 round figure may offer an intermediate halt whereas the 1.3000 psychological magnet could lure the pair buyers past 1.2965.

USD/CAD: Four-hour chart

Trend: Further weakness expected

Having heard from Ukraine President Zelenskiy that Kyiv managed to stop Russian troops from most directions, the nation’s Government Adviser mentioned that today will be hardest day.

“Russian plan is to use tanks to break through into Kyiv,” adds the diplomat.

Elsewhere, Deputy Ukrainian Defence Minister mentioned that Russian military may reach areas near Kiev today.

Market reaction

The news failed to offer any major impact as S&P 500 Futures seesaw around 0.50% whereas the US Dollar Index pare the previous day’s gains.

Read: Ukraine President Zelenskiy: Russian troops stopped from advancing in most directions

• GBP/USD consolidates the biggest daily fall in 16 weeks, eyes first negative weekly closing in four.
• US muster the courage to gather NATO leaders, UK proposed Russia’s exclusion from SWIFT.
• Hopes of ceasefire deal gain momentum even as Russia bombards Kyiv, yields weigh on USD, stock futures remain pressured.
• NATO meeting updates will be crucial, US data and Fedspeak are also important.

GBP/USD floats above 1.3400, up 0.25% intraday near 1.3425 heading into Friday’s London open.

The cable pair dropped the most since early November the previous day as the market rushed to the US dollar in search of risk-safety due to the Russian invasion of Ukraine. That said, the recent corrective pullback takes clues from headlines favoring a cautious optimism over a ceasefire deal between Moscow and Kyiv.

Ukraine President Zelenskiy’s comments that Russian troops stopped from advancing in most directions seemed to have added to the recently upbeat mood. However, Western leaders stay ready to take harsh measures for Moscow’s military action and hence keep the stock futures mildly offered.

That said, US President Joe Biden’s readiness to gather global leaders, virtually, to discuss the security situation in and around Ukraine improved mood in the early Asian session. Before that, comments from Russia, like “Moscow is willing to negotiate the terms of Ukraine's surrender,” add to the market’s cautious optimism. On the same line were chatters that Ukraine President Zelenskyy said they need to discuss ceasefire with Russia.

It should be noted that UK Prime Minister Boris Johnson proposed Russia’s exclusion from the SWIFT system to mark as the fiercest sanction. However, Ukraine President Zelenskiy recently mentioned that sanctions imposed on Russia are not enough.

Elsewhere, The Guardian conveyed Brexit-negative news while saying, “The European court of justice has been advised that British nationals living on the continent do not keep the advantages of EU citizenship now the UK has left the bloc.”

On the other hand, the second reading of the US Q4 GDP matched 7.0% annualized forecasts but firmer figures of Personal Consumption Expenditure, Chicago Fed National Activity Index and Jobless Claims seemed to have added strength to the US dollar on Thursday. Fedspeak could also be considered favoring the DXY as Atlanta Fed Raphael Bostic and Richmond Fed President Thomas Barkin join Federal Reserve (Fed) Governor Christopher Waller to favor faster rate-hikes.

Moving on, the US-NATO meeting will be crucial for the markets while Fedspeak and the Fed’s key inflation gauge, namely Core PCE Price Index, as well as Durable Goods Orders, for January will offer extra directives to the GBP/USD.

Technical analysis

Despite the corrective pullback, GBP/USD remains below a convergence of the 100-DMA and an upward sloping previous support line, near 1.3500, which in turn keeps the cable sellers hopeful.

• USD/RUB looks for more clarity on headlines of bombarding in Kyiv.
• The sanctions imposed on Moscow by the US aim to cripple their economy.
• The DXY remains subdued on the improved risk appetite of investors.

The USD/RUB pair is juggling near 85.00, as the market participants are in dilemma between the ceasefire expectations or more pain for the Russian economy amid sanctions imposed by the Western leaders.

USD/RUB surpassed a six-year high of around 82.45 on Thursday after the escalation of Russian military activities in the Donbas region of eastern Ukraine, which further extended to other cities including the nation’s capital Kyiv. The headlines full of missiles, gunfire, and military troops had spooked the market and investors ran towards safe-haven assets to protect their liquidity.

In response to that US President Joe Biden has held Russia responsible for the death and destruction in Ukraine. The former has imposed several sanctions on the Kremlin starting with the disconnection of Moscow from the SWIFT international banking system and technology imports.

The Biden administration said in a statement that sanctions will target all 10 of Russia’s largest financial institutions and impose export control measures that will more than halve Russia’s high-tech imports, as per AlJazeera.

The sanctions from US President Joe Biden on the Kremlin aims to cripple the Russian economy, as the punishment will spurt their borrowing rates and inflations and will intensify their capital outflows.

Meanwhile, Ukraine's central bank has banned payments to entities in Russia and Belarus as well as operations involving both nations' currencies, as per Reuters.

The US dollar index (DXY) is trading lackluster near 97.00 after the shine of safe-haven assets dims amid a dead cat bounce in risk-perceived assets.

Early Friday morning in Europe, Russian Envoy to Japan Mikhail Galuzin crossed wires via Reuters.

The diplomat initially warned Japan for its sanctions on Moscow while saying, “There will be serious Russian response to Japanese sanctions against Russia.”

“Can assure safe and responsible handling of nuclear facilities in areas of Russian forces' activity,” adds Russian Envoy.

FX implications

Forex market pays a little heed to the news amid cautious optimism over the Russia-Ukraine ceasefire, due to the US-NATO meeting. That said, S&P 500 Futures drop 0.50% but the US Dollar Index (DXY) pare recent gains by the press time.

Read: EUR/USD regains 1.1200 on cautious optimism over Russia-Ukraine crisis

Ukraine President Zelenskiy crossed wires during early Friday morning in Europe, via Reuters. The troubled nation’s leader recently said, “Russian troops stopped from advancing in most directions.”

Additional comments

Market reaction

The news adds to the market’s cautious optimism and weighs on the US dollar. However, today’s US President Joe Biden’s meeting with North Atlantic Treaty Organization (NATO) will be important to watch.

Read: EUR/USD regains 1.1200 on cautious optimism over Russia-Ukraine crisis

• AUD/USD picks up bids to refresh intraday high, consolidates biggest daily loss in a month.
• One-month-old previous support tests rebound from 21-DMA, horizontal area from mid-December adds to the downside filter.
• 100-DMA holds the key to further upside, MACD conditions signal pullback.

AUD/USD pokes 0.7200 while paring the biggest daily fall in a month during early Friday morning in Europe.

The quote dropped to the lowest levels in a week the previous day before bouncing off a 10-week-old horizontal support zone, around 0.7087-92.

In doing so, the AUD/USD prices battle the previous support line from late January, around 0.7200, by keeping the latest U-turn from the 21-DMA.

It should be noted, however, the receding bullish bias of the MACD joins the pair’s repeated failures to cross the 100-DMA level surrounding 0.7240 to keep AUD/USD buyers hopeful.

Meanwhile, a daily closing below the 21-DMA level of 0.7150 will direct bears towards the aforementioned horizontal area near 0.7092-87 before highlighting the 0.7000 threshold for the AUD/USD sellers.

Though, AUD/USD pair’s weakness past-0.7000 will be tough as December 2021 low near 0.6990 and January’s low of 0.6966 will be tough nuts for pair bears to crack afterward.

AUD/USD: Daily chart

Trend: Pullback expected

• EUR/JPY is eyeing 200-EMA for fresh upside momentum.
• The RSI (14) claims for consolidation until it surpasses 60.00.
• The cross is holding comfortably above 50-EMA at 129.18.

The EUR/JPY pair is oscillating around 129.30 in the Asian session, following a confident reversal from the lows of 127.92 reached Thursday.

On the 15-minutes chart, EUR/JPY is oscillating in a range of 129.13-129.72. The cross is forming a bullish flag pattern, which signals a directionless move after a strong run towards the north and leads to a further upside if consolidation breaks out decisively.

Generally, a consolidation phase denotes the placement of longs by the market participants who didn’t capitalize upon the initial rally. Apart from them, those investors place bids, which prefer to enter in an auction after a bullish bias sets in.

The asset is comfortably holding above the 50-period Exponential Moving Average (EMA), which is trading at 129.18. The Relative Strength Index (RSI) (14) has shifted its trading range from 60.00-80.00 to 40.00-80.00, which indicates consolidation but overstepping above 60.00 will strengthen the bulls further.

Bulls are paying attention to 200-EMA at 129.43, as a violation of the same will activate buyers and the cross will march towards Thursday’s high at 130.00 and Wednesday’s average traded price around 130.40.

On the flip side, bulls can lose grip below Friday’s low at 129.13 towards 61.8% Fibonacci retracement (placed between Thursday’s low at 127.92) at 128.62, followed by Thursday’s low at 127.92.

EUR/JPY 15-minute chart

Former Reserve Bank of Australia (RBA) board member Warwick McKibbin expresses his take on the central bank’s tightening plans for this year.

Key quotes

“The inflation numbers in Australia, although much lower than the rest of the world, are still towards the top end” of the RBA’s 2-3% target.”

“And the oil price shocks will obviously put upward pressure on that.”

“On top of the Covid-19 shocks and the worries of monetary tightening in major economies, we have now got an inflationary shock coming from higher oil prices out of Russia and an increase in geopolitical risks.”

“It may delay tightening of monetary policy, I’d think, particularly from the Fed.”

Market reaction

AUD/USD is rebounding in tandem with the risk tone, as it closes in on 0.7200, up 0.46% on the day.

• EUR/USD pares the biggest daily gains in three months, grinds near intraday top of late.
• Hopes that US could broker ceasefire deal through NATO triggered the latest rebound even as Russia bombards Ukraine.
• US President Biden will have a virtual meeting with global allies NATO members.
• ECB President Lagarde’s speech, US/Eurozone data may also entertain traders.

EUR/USD consolidates the previous day’s losses around 1.1220, up 0.15% intraday as markets expect a halt in the Russia-Ukraine war despite witnessing the latest bombarding of Moscow over Kyiv. In doing so, the quote seesaws around daily highs during the early Friday morning in Europe.

The latest optimism could be linked to US President Joe Biden’s readiness to gather global leaders, virtually, to discuss the security situation in and around Ukraine, per the White House. Also, Thursday’s comments from Russia, like “Moscow is willing to negotiate the terms of Ukraine's surrender,” add to the market’s cautious optimism. On the same line were chatters that Ukraine President Zelenskyy said they need to discuss ceasefire with Russia.

It’s worth noting, however, that Ukraine reported six explosions in Kyiv and confirmed losing command over Chernobyl nuclear plant. The news of the Ukrainian border post in the Zaporizhzhya region hit by missile strike also weighs on sentiment and challenge EUR/USD bulls.

Amid these plays, Wall Street closed with mild gains after the initial plunge whereas the US 10-year Treasury yields closed more or less at the same level the previous day, after marking a volatile day. However, S&P 500 Futures drop 0.30% and the US Treasury yields remain pressured around 1.95%, which in turn triggered the US Dollar Index (DXY) pullback from a 20-month high by the press time.

It should be noted that the second reading of the US Q4 GDP matched 7.0% annualized forecasts but firmer figures of Personal Consumption Expenditure, Chicago Fed National Activity Index and Jobless Claims seemed to have added strength to the US dollar on Thursday.

Fedspeak could also be considered favoring the DXY as Atlanta Fed Raphael Bostic and Richmond Fed President Thomas Barkin join Federal Reserve (Fed) Governor Christopher Waller to favor faster rate-hikes.

Looking forward, German GDP and Eurozone Consumer Confidence will initially entertain EUR/USD traders ahead of the Fed’s key inflation gauge, namely Core PCE Price Index, as well as Durable Goods Orders, for January. Additionally, comments from European Central Bank (ECB) President Christine Lagarde and Fedspeak will also be important for the pair traders to watch. Above all, geopolitical updates concerning Russia and Ukraine will provide clear direction.

Read: EUR/USD Forecast: Russia-Ukraine war put the world on its toes

Technical analysis

EUR/USD pair’s ability to stay beyond three-month-old horizontal support, around 1.1185-75, directs the quote towards February’s low near 1.1280 but a two-week-long descending resistance line, near 1.1330, will challenge the bulls afterward.

Meanwhile, a downside break of the 1.1175 will aim for the previous month’s low of 1.1121 and the latest low of 1.1106 ahead of targeting the 61.8% Fibonacci Expansion (FE) of the EUR/USD pair’s moves between September 2021 and February 2022, near the 1.1000 psychological magnet.

US Senator Marco Rubio, Vice Chairman of the Select Committee on Intelligence, tweeted out: “Appears at least 36 missiles have been fired at Kyiv the past 40 minutes.”

Meanwhile, the Wall Street Journal (WSJ) confirms that Russian forces unleashed the second attack on Ukraine in the early hours of Friday.

Russian military struck on central Kyiv by explosions after President Vladimir Putin ordered an offensive that he said was aimed at toppling the government.

Ukraine sustained 137 dead and 316 injured on Thursday, the country’s President Volodymyr Zelenskyy grieved in his midnight address to the nation.

Market reaction

These headlines fail to have any impact on the market sentiment, as it continues to stabilize ahead of the US and NATO meeting to discuss the security situation in and around Ukraine.

The S&P 500 futures are down only 0.33% as against the previous drop of 0.66%.

Gold is looking to extend its recovery above $1,900, currently trading at $1,913.

• NZD/USD bears are holding the fort as correction decelerates with a focus on the Ukraine crisis. 
• US president Biden will hold a NATO summit at 9am Washington time. 

NZD/USD is being pressured following a stunning correction on Wall Street whereby prices rallied in risk-FX amid a more optimistic outlook from US stock investors over the Russian invasion of Ukraine.  At the time of writing, the kiwi is flat near 0.6697, pressed up against hourly resistance in a decelerating correction as Kyiv and other critical parts of Ukraine faces a bombardment of bombing by Russian forces.  

There is little to report on the domestic front other than Retail Sales that arrived at 8.6% for the fourth quarter that beat expectations of -2.7% but this was not paid attention to considering the high stakes nature of global events. RBNZ Governor Orr spoke, saying “we’re particularly concerned about inflation expectations,” adding that they will ''keep the possibility of moving rates quicker if necessary.” However, this sentiment has well and truly been absorbed by the market already. The focus is on Ukraine. 

The missiles rain down

The latest is more bombing overnight by Russia and 60,000 Russian troops are reported to have now invaded Ukraine. The US President Joe Biden will be meeting with allies and the NATO heads of state and government in an extraordinary virtual summit to discuss the security situation in and around Ukraine, the White House reports. This virtual summit from the situation room will be closed press, taking place at 09:00hrs, Washington. 

• Gold picks up bids to consolidate late Thursday’s pullback from multi-day high.
• Russia bombards Ukraine, six explosions reported in Kyiv.
• US President Biden braces for a meeting with allies and NATO heads, UK proposed including SWIFT in latest Russian sanctions.
• Yields drag USD, stock futures drop as markets await further geopolitical updates, US data.

Gold (XAU/USD) regains upside momentum around $1,915 during Friday’s Asian session, up 0.82% intraday following the U-turn from a 17-month high. The bullion’s latest recovery could be linked to Russia’s bombing over Ukraine and missile attacks at the border.

In its latest update, Ukraine reported six explosions in Kyiv and confirmed losing command over Chernobyl nuclear plant. The news of the Ukrainian border post in the Zaporizhzhya region hit by missile strike also weighs on sentiment and favors the XAU/USD’s safe-haven demand.

Furthermore, US President Joe Biden showed readiness to meet friends and heads of the North Atlantic Treaty Organization (NATO) to discuss the security situation in and around Ukraine, per the White House.

It’s worth noting that Russia’s rejection of the Western push to not indulge in the invasion of Ukraine triggered the flight-to-safety the previous day, which in turn allowed the quote to initially cross the key hurdles and refresh multi-day high before marking a daily negative closing.

Comments from Russia, like “Moscow is willing to negotiate the terms of Ukraine's surrender,” seemed to have triggered the late Thursday’s rebound in market sentiment, resulting in gold’s pullback. Additionally, chatters that Ukraine President Zelenskyy said they need to discuss ceasefire with Russia also weighed on the metal prices previously.

Against this backdrop, Wall Street closed with mild gains after the initial plunge whereas the US 10-year Treasury yields closed more or less at the same level the previous day, after marking a volatile day. However, S&P 500 Futures drop 0.20% and the US Treasury yields remain pressured around 1.95% by the press time.

Moving on, geopolitical updates from Russia-Ukraine are the key catalyst for the gold traders to watch. Also important will be the Fed’s key inflation gauge, namely Core PCE Price Index, as well as Durable Goods Orders, for January.

Read: Gold prices & Russia-Ukraine conflict

Technical analysis

Despite reversing from a 17-month high, gold prices remain above November 2021 high, which in turn joins firmer RSI and bullish MACD signals to direct the XAU/USD buyers towards a horizontal area comprising June 2021 peak surrounding $1,917.

Should the quote manage to provide a daily closing beyond $1,917, it will muster the courage to battle the $1,973-80 resistance zone, including multiple levels marked during July-September 2020.

During the run-up, tops marked in January 2021 surrounding $1,960, as well as November 2020’s high $1,965, will act as an intermediate halt.

Alternatively, a daily closing below $1,917 may recall the $1,900 threshold on the chart, if not then November 2021 top, close to $1,877, will flash on the bear’s radar.

Gold: Daily chart

Trend: Further upside expected

• USD/INR is eyeing 75.80 amid the Russia-Ukraine crisis as India’s fiscal deficit will expand further.
• The Indian rupee may remain on the backfoot as oil prices will boil further.
• Biden-NATO meets to discuss the security situation in Ukraine, which will likely be the next focus.

The USD/INR pair is trading around 75.40, as a little expansion in the risk appetite has brought profit-booking in the greenback near northern levels. The positive tone in the spot, however, is still intact.

The tensions between Russia and Ukraine seem escalating further as the Kremlin has marked Ukrainian President Volodymyr Zelensky as the number one target and his family is the number two target, per The New York Times. The intention of attacking a country’s leader states that the aggression of a nation towards its counterpart has reached its peak and the situation is not going to be resolved anytime soon.

The escalation in tensions between Russia and Ukraine has already bolstered oil prices and India, being the large importer of oil has to go through its various negative implications. This may expand its fiscal deficit substantially and hammer the Indian rupee further. Adding to that, the war situation in Europe is hinting at an upcoming recession in Europe, which may keep the Indian rupee on the backfoot.

The US dollar index (DXY) has slipped below 96.90 amid a dead cat bounce in risk-sensitive assets. Meanwhile, the White House has reported that US President Joe Biden will be meeting with allies and the NATO heads of state and government in an extraordinary virtual summit to discuss the security situation in and around Ukraine. For sure, the agenda of the meeting will roll majorly around more sanctions after all NATO cannot attack Russia, as Ukraine is not a part of NATO.

Well, the situating soaring inflation in India amid rising oil prices will push the Reserve Bank of India (RBI) to step up its interest rates but the greenback will have an upper hand amid its expected aggressive monetary policy and tag of ‘safe-haven’ asset.

Ukrainian border post in Zaporizhzhya region has been hit by a missile strike and there are casualties being reported by the border guard service.

More to come...

Following Russia's renewed invasion of eastern Ukraine and Russian President Vladimir Putin's mobilization of forces all along the borders of Ukraine, the US President Joe Biden will be meeting with allies and the NATO heads of state and government in an extraordinary virtual summit to discuss the security situation in and around Ukraine, the White House reports.

This virtual summit from the situation room will be closed press, taking place at 09:00hrs, Washington. 

Biden had ordered US troops already based in Europe to shore up the defences of nations bordering Ukraine and has sent additional reinforces following the Russian invasion of Ukraine.  

The Pentagon said on Thursday that it was sending an additional 7,000 troops to Europe, after Russia’s invasion of Ukraine launched the biggest land war in Europe since World War II.

Troops have been employed to the Baltic Republics, Poland and Ukraine's southeastern flank.  

''The Pentagon this week moved six F-35 fighter jets and a slew of other warplanes to Eastern Europe to shore up support for NATO allies. Mr. Austin also ordered an infantry battalion task force — some 800 troops — to the Baltics. Those troops and warplanes were already in the European theatre, the official said,'' the New York Times reported on Thursday. 

 Meanwhile, the US Department of Defense has said, ''twenty AH-64 Apache attack helicopters will also deploy from Germany to the Baltic region and 12 Apache helicopters will move from Greece to Poland.  ''

The following information has been taken from the US Department of Defense website:

"This additional personnel are being repositioned to reassure our NATO allies, deter any potential aggression against NATO member states, and train with host-nation forces," DOD officials said in a written statement. All forces are under the command of Air Force Gen. Tod D. Wolters, the commander of the U.S. European Command.   

Officials said the moves are temporary.   

These moves are the latest in a series designed to reassure the frontline states. The United States sent 1,000 soldiers from a Stryker squadron from Germany to Romania. An 82nd Airborne Division infantry brigade combat team will be deployed to Poland from Fort Bragg, North Carolina. Company-sized Stryker units will deploy to Hungary and Bulgaria.   

In addition, Austin ordered 8,500 service members to a heightened state of readiness should NATO activate its Rapid Reaction Force.  

Overall, there are about 90,000 US service members based in Europe. ''

• GBP/USD bears are moving in as risk sours over Ukraine. 
• Attacks continue for another night with no sign of a cease-fire. 

There are explosions in Kyiv being reported which is hurting risk sentiment in Asia. nevertheless, GBP/USD is still higher by some 0.15% but is struggling to convince in the correction that has started to decelerate in the face of risk aversion and the Ukraine crisis. At 1.3392, the price is below the 1.3394 highs that were made following a recovery from 1.3366 lows. 

On the worst day since March 2020 as investors moved to safe havens when Russian forces invaded Ukraine, the pound fell 1.8%. This was the lowest since December 22.

Ukraine reported columns of troops crossing over from Russia and Belarus, taking up positions on the coast from the Black and Azov seas. The Russian assault is being fought on several fronts after it attacked from the east, north and south on Thursday.

The Kremlin launched the offensive in the early hours of the morning, shortly after President Vladimir Putin declared war in a dramatic televised address. He threatened any country attempting to interfere with "consequences you have never seen".

Ukraine's President Volodymyr Zelensky has since vowed to continue fighting while nations such as the US are sending troops to the Eastern flank of Europe in fears of overspill into the NATO allies. 

Volodymyr Zelensky "a new iron curtain" was falling into place and his job was to make sure his country remained on its western side.

The EU, UK and the US have imposed new sanctions in order to cripple the Russian economy. They are the most significant deployment of economic penalties against a country with Russia's economic size and integration in global markets. 

Ukrainian leaders and some US lawmakers have urged US president Joe Biden to go even further with the sanctions to punish Moscow and Putin for the attack on Ukraine. However,  they will not prevent a protracted crisis and Russia may not start to feel the full effects of the sanctions for weeks to come. 

Meanwhile, domestically, British finance minister Rishi Sunak said he had spoken with Bank of England Governor Andrew Bailey on Thursday to ensure financial stability after Russia's invasion.

BoE in focus

Also, BoE's Chief Economist Huw Pill provided more of the same dovish rhetoric.

He argues that the central bank would seek to bring fast-rising inflation down in a "measured way" and one "that doesn't disturb the rest of the economy". The UK rate market had already scaled back expectations in recent days for a 0.50 point hike following less hawkish comments from BoE Monetary Policy Committee officials.

The Old Lady's Governor Andrew Bailey said on Wednesday that markets should not get carried away about the likely scale of interest rate rises, while policymaker Silvana Tenreyro said she saw the case for further modest tightening.

''Money markets are pricing in a 55% chance of a 50 basis point rate hike from the BoE in March and fully pricing a rate increase of 125 bps by year-end,'' Reuters reports.

NEXTA TV has reported that there have already been about six explosions in Kyiv, the capital of Ukraine.

There are reports of an attack on Ukraine air defence systems in and around the city ahead of larger-scale attacks.

Deputy of the Verkhovna Rada of Ukraine, Oleksiy Goncharenko, reported that the armed forces of Ukraine shot down an enemy plane near Kyiv.

Goncharenko said: "The air defense of Kyiv is shot down by missiles fired by the occupiers.”

Market reaction

The FX market is largely unchanged on the explosion news, as the US dollar index remains pressured near 97.00.

Gold price keeps its bid tone intact, currently trading around $1,912.

• AUD/JPY fades bounce off one-week low, battles short-term key support.
• Downbeat RSI, receding bullish bias of MACD also teases sellers.
• Ascending trend line from early December add to the downside filters, bulls need to cross seven-week-old resistance to regain controls.

AUD/JPY remains on the back foot around 82.70, down for the second consecutive day on fading bounce off weekly low. That said, the quote short-term key hurdles to the further downside during the mid-Asian session on Friday.

Despite offering a daily close beyond the 50-DMA and one-month-old rising trend line the previous day, AUD/JPY drops back to the same support confluence surrounding 82.50 on Friday.

In addition to the pullback towards crucial support, the downbeat RSI line and the recently weaker MACD signals also favor the pair sellers to aim for a below 82.50 area.

In doing so, the upward sloping trend line from early December 2021, near 81.20, will be an important support to watch. However, the 82.00 threshold may act as an intermediate halt.

Alternatively, recovery moves may initially aim for 83.00 and 83.30 but AUD/JPY bulls remain unconvinced below a seven-week-long resistance line, around 83.85 by the press time.

Should the risk barometer pair rise past 83.85, it can rally towards January’s high of 84.30.

AUD/JPY: daily chart

Trend: Further weakness expected

• Market sentiment turns cautious as Russia’s next move eyed.
• S&P 500 Futures fades bounce off nine-month low, US 10-year Treasury yields hover around 1.97-98%.
• US data came in positive, Fedspeak was mostly upbeat but nothing mattered more than Russia-Ukraine war.

Having witnessed a volatile day on Thursday, global markets portray traders’ anxiety amid a light calendar and lack of clarity over the Russia-Ukraine issue.

While portraying the market’s indecision, the S&P 500 Futures drop 0.65% intraday to 4,256 whereas the US 10-year Treasury yields seesaw around 1.97-98% by the press time.

That said, the US equities initially tanked on the early Thursday and the US Treasury yields rallied on news that Russia invaded Ukraine and reached past border regions towards the capital. Moscow’s aggressive move pushed Western leaders towards harsh sanctions and readiness to help Kyiv with military power.

However, comments from Russia, like “Moscow is willing to negotiate the terms of Ukraine's surrender,” seemed to have triggered the late Thursday’s rebound in market sentiment. Additionally, chatters that Ukraine President Zelenskyy said they need to discuss ceasefire with Russia also favored risk sentiment previously.

Though, CNN’s news citing the Russian military’s readiness to bombard Kyiv, as well as comments from Ukrainian Envoy to Japan who conveyed that the Ukrainian government lost control over Chernobyl nuclear plant, are likely catalysts that recently weigh on the market’s mood.

Elsewhere, the second reading of the US Q4 GDP matched 7.0% annualized forecasts but firmer figures of Personal Consumption Expenditure, Chicago Fed National Activity Index and Jobless Claims seemed to have added to the US dollar’s strength.

Also, comments from Atlanta Fed President and FOMC member Raphael Bostic and Richmond Fed President, as well as an FOMC member, Thomas Barkin, seemed to have additionally favored the USD bulls. However, Cleveland Fed President Loretta Mester said that she doesn't think raising interest rates by 50 bps in March is compelling. On the contrary, Federal Reserve (Fed) Governor Christopher Waller said on Friday, he still believes a 50-basis points (bps) March rate hike is a possibility if the economic data comes in stronger.

Looking forward, geopolitical updates from Russia-Ukraine are the key catalyst for the market. Also important will be the Fed’s key inflation gauge, namely Core PCE Price Index, as well as Durable Goods Orders, for January.

• The DXY has stabled around 97.00 amid a lack of clarity over the ceasefire between Moscow and Kyiv.
• The risk-off impulse is still intact despite a little expansion in the risk appetite of investors.
• The sanctions imposed on Russia may soar inflation further, impacting the Fed's tightening plans. 

The US dollar index (DXY) has ceased around 97.00, as investors stare at negotiations between Russia and Ukraine, with the Russian President Vladimir Putin willing to discuss a ceasefire with his Ukrainian counterpart Volodymyr Zelenskyy on Kyiv's surrender.

Earlier, Russia’s military action in Ukraine had caused destruction to human life. To retaliate against the Russian arbitrariness, US President Joe Biden imposed harsh sanctions on Russia to cripple its economy. This contains majorly isolation of Russia by disconnecting it from the SWIFT international banking system and cutting its technology imports.

Moreover, US President Joe Biden said that: This is a premeditated attack. "Putin is the aggressor. Putin chose this war. And now he and his country will bear the consequences." as per Reuters.

Risk implications on Fx

Although the expectations of a ceasefire have increased after the Kremlin and Ukraine have agreed to discuss upon. Following that, the market participants have witnessed ease in the highly volatile trading activities. However, a risk-off impulse is still intact and any negative development on the Russia-Ukraine war may channel funds back to the square.

Meanwhile, the bets over an aggressive monetary policy are back on the table as inflation seems to soar further amid the sanctions on Russia, as its multiplier effect would be increasing West Texas Intermediate (WTI) prices.

Apart from the headlines of expected bombarding on Kyiv by the Kremlin, investors will focus on monthly US Durable Goods Orders and PCE inflation, which are due on Friday.

S&P: New Zealand 'AA+/A-1+' ratings affirmed; outlook stable

more to come ....

French President Emmanuel Macron said in a statement on Friday, he may offer EUR300 million of aid to Ukraine as well as military equipment.

Additional quotes

“Putin wants to bring us back to the age of empires and confrontations.”

“EU sanctions will be followed by French national sanctions on certain people to be announced later.”

EUR/USD hovers around 1.1200

After the impressive recovery from 2022 lows of 1.1106, EUR/USD is keeping its range around 1.1200 so far this Friday, watching out for more drama on the Russia-Ukraine war.

European Commission President Ursula von der Leyen said on Friday, “steps agreed by EU leaders include financial sanctions, targeting 70% of the Russian banking market and key state-owned companies, including in defense.”

Additional comments

Related reads

• Ukraine envoy to Japan: Ukraine does not have control of Chernobyl nuclear plant

• French Pres. Macron: To offer 300 million euros of aid to Ukraine, military equipment

• USD/JPY retreats from weekly high, renews intraday low of late.
• Tokyo CPI improved in February, Russia’s bombardment eyed.
• Moscow rushed past Chernobyl, Ukraine President said need to talk about ceasefire with Russia.
• Geopolitical updates will determine near-term market moves, US data, Fedspeak can act as additional catalysts.

USD/JPY seesaws around 115.50-60 during Friday’s Asian session, following the biggest daily jump in three weeks.

The yen pair dropped to the lowest since February 03 early on Wednesday before bouncing off the 100-DMA support, currently near 114.40. While Russia’s invasion triggered the initial flight-to-safety, hawkish comments from Fed and upbeat US data seem to have added to the USD’s strength and called back the USD/JPY bulls.

The recovery moves could also be linked to the hopes of a halt in further causalities as the West shows readiness to step in and Russia signals willingness to discuss the “Terms of Ukraine's surrender.”

As per the latest updates, the Ukrainian Envoy to Japan conveyed that the Ukrainian government lost control over Chernobyl nuclear plant. Further, talks that Russia us up for overthrowing Ukraine government and may soon bombard Kyiv also keep USD/JPY traders on their toes.

Talking about data, the second reading of the US Q4 GDP matched 7.0% annualized forecasts but firmer figures of Personal Consumption Expenditure, Chicago Fed National Activity Index and Jobless Claims seemed to have added to the US dollar’s strength.

At home, Tokyo Consumer Price Index (CPI) rose to 1.0% YoY versus 0.6% expected and 0.5% forecast whereas Tokyo CPI ex Food, Energy dropped to -0.6% from -0.7% previous readings and -0.5% forecasts for February.

comments from Atlanta Fed President and FOMC member Raphael Bostic and Richmond Fed President, as well as an FOMC member, Thomas Barkin, seemed to have also favored the USD bulls even as Cleveland Fed President Loretta Mester said that she doesn't think raising interest rates by 50 bps in March is compelling

Amid these plays, Wall Street closed with mild gains after the initial plunge whereas the US 10-year Treasury yields closed more or less at the same level the previous day, after marking a volatile day. However, S&P 500 Futures drop 0.20% and the US Treasury yields remain pressured around 1.96% by the press time.

Moving on, geopolitical updates are the key for USD/JPY, due to its risk-barometer status. Also important will be US Core PCE Inflation data and Durable Goods Orders for January, not to forget the Fedspeak.

Technical analysis

Unless providing a daily close below the 100-DMA, around 114.40 by the press time, USD/JPY bulls remain hopeful to refresh monthly peak, currently near 116.35.

In recent trade today, the People’s Bank of China (PBOC) set the yuan (CNY) at 6.3346 vs the last close of 6.3299.

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.

Federal Reserve (Fed) Governor Christopher Waller said on Friday, he still believes a 50-basis points (bps) March rate hike is a possibility if the economic data comes in stronger.

Key quotes

Market reaction

The US dollar is attempting a minor bounce on the hawkish comments from the Fed Governor while gold price is capping its renewed upside to trade at $1,908, as of writing.

• AUD/USD bracing for impact as Ukraine continues to be under attack by Russia.
• Risk appetite is waning again in Asia following an upbeat recovery on Wall Street.

AUD/USD is under pressure following a subdued London before a storm of volatility during the New York open that saw a sell-off to test below 0.71 the figure before risk appetite surged and pulled the Aussie back to test as high as 0.7178. The pair has been changing hands since between there and the Asia session low of 0.7141 so far. 

At the time of writing, the currency is flat on the session trading at 0.7160 as traders weigh prospects of further attacks from Russia on Ukraine. Markets are bracing for one of the biggest attacks yet on Kyiv, as reported by CNN: 

Russia expected to initiate large bombardment on Kyiv at 0100GMT - CNN citing intelligence

''Ukrainian forces have battled Russian invaders on three sides on Thursday after Moscow unleashed the biggest attack on a European state since World War Two, prompting tens of thousands of people to flee their homes,'' Reuters reports. 

With such escalation of the attacks on the nation and no sign of a cease-fire, investors who might have rediscovered much of their appetite for riskier bets could start to back off again which would be expected to weigh on global equities and high beta currencies, such as AUD.

Despite the bounce on Wall Street, MSCI's gauge of stocks across the globe closed down 0.46% after earlier falling more than 3% to touch its lowest level since March 2021.

However, the Nikkei is higher by 1.5% and the XJO is in the green, but only just. 

Reuters is out with the comments from the Ukrainian ambassador to Japan, citing that “Ukraine does not have control of Chernobyl nuclear plant.”

Additional comments

“Workers at the facility are now held as prisoners.”

“Russian special forces took over the facility but do not know how to control it.”

Meanwhile, NEXTA TV tweeted out a warning from Oleksiy Arestovich, an advisor to the head of the Office of the President of Ukraine.

Arestovich said: “Tomorrow will be the worst day. More terrifying than today.”

Market reaction

Gold price is catching a fresh bid on the above headlines, jumping back beyond the $1,900 barrier.

Currently, gold price is trading at $1,910, up 0.66% on the day.

• USD/CAD is auctioning below 1.2800 ahead of a ceasefire expectation between Russia and Ukraine.
• The DXY loses strength on modest trim in the risk-off impulse.
• A rebound in WTI oil prices has underpinned the Canadian dollar against the greenback.

The USD/CAD pair keeps its range around1.2800, as investors wait for the announcement of sanctions from the West in response to Russia’s invasion of Ukraine.

The headlines from CNN that “Russian military forces are expected to begin a large-scale bombardment of the Ukrainian capital city of Kyiv” have held the nerves of investors. The risk-off of the market is still in action, however, the investors have turned cautiously optimistic as Moscow is ready to negotiate terms on Ukraine’s surrender.

According to Kremlin Press Secretary Dmitry Sergeyevich Peskov, Russian President Vladimir Putin is willing to engage in discussions with the Ukrainian President Volodymyr Zelenskyy, with a focus on obtaining a guarantee of neutral status and the promise of no weapons on its territory, as per the Ommcom news.

Meanwhile, West Texas Intermediate (WTI), futures on NYMEX, has retreated from the lows around $91.00, which has also underpinned the Canadian dollar against the greenback.

The US dollar index (DXY) has turned flat as the risk-off impulse loses its grip amid the expectations of negotiations between Russia and Ukraine to a ceasefire but with various stipulations. However, the DXY may find ground soon as the fears of an expected aggressive monetary policy by the Federal Reserve (Fed) will start hovering again. Meanwhile, the 10-year US Treasury yields look to reclaim 2%.

• Silver picks up bids to refresh intraday high, pares latest losses.
• Markets keens await Russia’s next move, yields, S&P 500 Futures print mild losses.
• US data, Fedspeak may also entertain silver traders, bulls have an upper hand until the war is over.

Silver (XAG/USD) takes the bids around $24.40 to renew the intraday top during Friday’s Asian session.

The bright metal rallied to the highest since August 2021 before reversing from $25.62. The pullback was fierce enough to print a negative close of the commodity even as market sentiment remains sour with eyes on the Russia-Ukraine war.

Global leaders criticize Russia’s invasion of Ukraine and showed readiness to levy more sanctions on Moscow, also help Ukraine with military power if needed. Even so, President Vladimir Putin’s forces rose past Chernobyl and Ukraine President Zelenskyy signed a decree for general mobilization.

On the positive side were comments from Russia, like “Moscow is willing to negotiate the terms of Ukraine's surrender,” to trigger the late Thursday’s pullback. Additionally, chatters that Ukraine President Zelenskyy said they need to discuss ceasefire with Russia also favored risk sentiment during the late Thursday.

That said, Wall Street closed with mild gains after the initial plunge whereas the US 10-year Treasury yields closed more or less at the same level the previous day, after marking a volatile day. However, S&P 500 Futures drop 0.20% and the US Treasury yields remain pressured around 1.96% by the press time.

Markets currently await updates from Ukraine as CNN conveyed that the Russian military is up for bombardment on Kyiv.

Other than the geopolitical news, US Core PCE Inflation data and Durable Goods Orders may join Fedspeak to provide immediate directions to silver traders.

Technical analysis

Silver bounces off the 200-DMA level of $24.18 to mark another battle with a downward sloping trend line from July 2021, near $24.35-40.

A clear break of $24.40 will direct XAG/USD towards the 61.8% Fibonacci retracement (Fibo.) of July-September downside, around $24.75.

However, tops marked in November and the latest swing high, respectively around $25.40 and $25.65, will challenge the silver buyers afterward.

Meanwhile, the 50% Fibo. level surrounding $24.10 precedes the $24.00 threshold to restrict short-term XAG/USD downside.

Silver: Daily chart

Trend: Further upside expected

US Secretary of State Antony Blinken said in an interview with ABC News, he “is convinced the goal of the Russian invasion is regime change in Ukraine.”

Meanwhile, markets await Russia’s expected large bombardment on Kyiv at 0100GMT, per CNN, citing intelligence.

Market implications

The Asian markets are on a recovery mode, tracking the positive close on Wall Street overnight but looming Russian risks could derail the renewed upside.

The US dollar index is consolidating the sharp pullback from yearly highs of 97.74, currently trading at 97.05.

• USD/RUB regains upside momentum after stepping back from record top before a few hours.
• March 2020 top, ascending trend line from November 2021 challenge bears.
• Bullish MACD keeps buyers hopeful, January 2016 peak guards immediate upside.

USD/RUB reverses the late Thursday’s pullback from an all-time high during Friday’s Asian session, picks up bids near 84.95 by the press time.

The quote marked a record top of 90.00 the previous day before closing around 84.34.

Even so, the bullish MACD signals and the pair’s ability to stay beyond convergence of March 2020 high and a three-month-old ascending trend line, near 82.85, keep USD/EUB bulls hopeful.

That said, the pair buyers presently eye tops marked in early 2016, around 86.00, before challenging the latest peak of 90.00.

It’s worth noting that the sustained run-up beyond 90.00 will direct USD/RUB buyers towards the 100.00 psychological magnet.

Alternatively, a downside break of 82.85 will direct the quote towards a one-week-long support line near 79.90, wherein the last month’s high near 80.40 may act as an intermediate halt.

USD/RUB: Daily chart

Trend: Bullish

Australian Prime Minister Scott Morrison said in a statement on Friday, the country “is imposing further sanctions on individual Russians.”

Morrison said, “it’s unacceptable that China is easing trade restrictions with Russia at this time.”

Adding to this, the White House noted that “China ties with Russia too limited to compensate for sanctions.”

Market reaction

The risk sentiment is recovering, as the dust settles over the Russian assault of Ukraine, with AUD/USD testing daily highs near 0.7180, up 0.17% on the day.

The S&P 500 futures are trimming losses, trading around 4,280.

Japanese Finance Minister Shunichi Suzuki said Friday that his government will freeze assets in some Russian banks, as a part of the economic response to Russia's invasion of Ukraine.

Meanwhile, Japanese Industry Minister Koichi Hagiuda said the country will appropriately deal with oil release from national reserves in cooperation with relevant countries and International Energy Agency (IEA).

• USD/JPY rallies to mid-115.00s despite drop in US yields, bulls eye 116.30 resistance

• WTI picks up bids to reverse the late Wednesday’s pullback from fresh eight-year high.
• Western sanctions rise for Russia, hopes of intermediate pause gained as Moscow showed readiness to discuss Ukraine’s surrender.
• Fedspeak, US data may entertain oil buyers, war news are the key.

WTI crude oil prices renew upside momentum during early Friday morning in Asia, up 1.16% intraday near $94.00 by the press time.

The black gold rose to the fresh high since July 2014 the previous day as geopolitical tussles between Russia and Ukraine triggered oil supply fears as Moscow is the world’s third-largest oil producer. However, the quotes reversed from $100.00 on mixed chatters suggesting an intermediate halt in the war, before the latest rebound from $91.00.

Russia’s invasion of Ukraine triggered a widespread rush to risk-safety and propelled oil prices the previous day as President Vladimir Putin’s forces rose past Chernobyl and Ukraine President Zelenskyy signed a decree for general mobilization.

The West levied heavy sanctions on Russia and showed readiness to support Ukraine by the military. The same joined comments from Russia, like “Moscow is willing to negotiate the terms of Ukraine's surrender,” to trigger the late Thursday’s pullback. On the same line were the chatters that Ukraine President Zelenskyy said they need to discuss ceasefire with Russia.

However, the latest rebound of WTI crude oil prices seems to have taken clues from CNN’s news signaling a Russian bombardment over Kyiv around 01:00 AM GMT.

Amid these plays, S&P 500 Futures drop 0.50% and the US 10-year Treasury yields struggle for fresh clues around 1.97% by the press time.

Moving on, geopolitical headlines from Ukraine and Russia are important for oil traders. Additionally, US Core PCE Inflation data and Durable Goods Orders may join Fedspeak to offer extra directives.

Technical analysis

Repeated failures to provide a daily closing beyond an ascending resistance line from July 2021, around $95.00 at the latest, challenges WTI bulls.

• Gold price retreats from $1878.10 but may find offers near $1,913 as investors’ risk appetite expands.
• The expectations of an aggressive monetary policy have underpinned the greenback against gold.
• Inflation to soar further amid rising crude oil prices, Russia's expected bombardment of Kyiv eyed.

 Gold price is hovering near $1,900, off from Friday’s low at $1,878.10 after falling on its face from Thursday’s high of $1,974.48. The precious metal has regained some strength and moving higher but is likely to sense selling pressure near $1,908 levels.

On Thursday, the precious metal nosedived with much more acceleration than it showed while scaling higher. It seems that the third law of motion kicked in and the yellow metal fell like there is no other day.

Despite the fact that the risk-off impulse is still intact owing to the negative developments in the Russia-Ukraine war, the investors have underpinned the greenback against the precious metal. The rationale behind the fall in the gold prices can be tagged to the rising bets over an aggressive tightening policy by the Federal Reserve (Fed) post the Russia-Ukraine crisis. The unstoppable crude oil prices are set to move the prices of finished goods higher. Expectations of soaring inflation in an already high inflation market may force to central banks to adopt some strict measures to contain the situation.

Apart from the aggressive tightening monetary policy, improvement in the US GDP numbers and slippage in the weekly Initial Jobless Claims have hammered the gold prices. The US GDP numbers have improved to 7% while the Initial Jobless Claims have reduced to 232K against the previous print of 249K.

The US dollar index (DXY) continues to remain rangebound post the sanctions announcement by the US on Russia in response to its military action on eastern Ukraine. Meanwhile, the benchmark 10-year US Treasury yields are trading at 1.97%

Gold Technical Analysis

On an intraday scale, XAU/USD is sensing selling pressure near the 21-period Exponential Moving Average (EMA), which is trading around $1,908. The Relative Strength Index (RSI) (14) has shifted its trading range from 20.00-40.00 to 40.00-50.00, which indicates a consolidation ahead.

Gold 15-min chart