Market Focus

U.S. stocks staged a massive reversal Thursday after Wall Street’s main benchmarks each plunged more than 2% in early trading as Russia’s military invasion of Ukraine roiled financial markets around the globe. The Nasdaq Composite rebounded from a morning sell-off that saw the index tumble more than 3% to close 3.4%, or 436 points higher at 13,473.58 in its best day of 2022. The Dow Jones Industrial Average closed in positive territory after plunging more than 800 points during intraday trading, and the S&P 500 bounced back from a drop of 1.5% to close 1.5% higher at 4,288.69.

President Joe Biden imposed stiff sanctions on Russia over its invasion of Ukraine as Western nations warned that Kyiv could fall. As Russian tanks, troops and aircraft pushed closer to Ukraine’s capital city, Biden, speaking to the nation from the White House, promised to inflict a “severe cost on the Russian economy” that will hamper its ability to do business in foreign currencies.

“This is a dangerous moment for all of Europe,” Biden said, adding that the “next few weeks and months will be hard on the people of Ukraine.” The Russian military effectively eliminated Ukraine’s air defences and rapidly advanced across the neighbouring country, meaning Kyiv could quickly be overrun as well, a senior Western intelligence official said.

After weeks of warnings that an attack would bring about a “massive” economic response, Biden announced that the U.S. would sanction Sberbank — Russia’s largest lender — and four other financial institutions that represent an estimated $1 trillion in assets, as well as a broad swath of Russian elites and their family members. The Treasury said the penalties target “nearly 80% of all banking assets in Russia.”

Main Pairs Movement

Panic took over the financial markets as Russia launched a military attack on Ukraine. Moscow attacked not only the Donbas region but got near Kyiv during US trading hours. Russia has so far ignored global sanctions and seems determined to take full control of Ukraine.

Gold has soared to $1,974.40 a troy ounce, its highest since September 2020. The yellow metal then retreated and plummeted to intraday lows at the $1,880.00 price zone during US trading hours as investors unwind fear-related trades following US President Biden’s statement.

Meanwhile, Atlanta Federal Reserve President Raphael Bostic noted that Fed policy is poised to return to a more normalised stance. Among other things, he added that he was “very open” to go for more than 3 rate hikes this year.

EUR/USD recovered from a fresh 2022 low of 1.1105 to currently trade around 1.1195. The GBP/USD pair stands at around 1.3380, while commodity-linked currencies dropped significantly during Thursday’s trade. Crude oil prices also dipped into negative territory after reaching multi-year highs. WTI traded as high as $100.50 a barrel and is now changing hands at around $94.50. Brent is trading at $99.50.

Technical Analysis

EURUSD (4-Hour Chart)

The EUR/USD pair tumbled on Thursday, extending its previous slide from the 1.1360 level amid panic through financial markets. The pair was surrounded by heavy bearish momentum most of the day, collapsing to monthly lows below the 1.1160 mark in the early American session. The pair is now trading at 1.1148, posting a 1.36% loss on a daily basis. EUR/USD stays in the negative territory amid risk-off market sentiment as Russia launched a full-scale invasion of Ukraine earlier in the day. This has bolstered the demand for safer assets like the US dollar, acting as a headwind for the EUR/USD pair. For the euro, the latest geopolitical developments and risk appetite trends will decide the near-term direction for the currency as there are no economic releases on the Eurozone calendar.

On the technical side, the RSI is at 20, suggesting that the pair is in the oversold zone now, a trend reversal could be expected. For the Bollinger Bands, the price is dropping out of the lower band, indicating a strong trend continuation for the pair. In conclusion, we think the market will be bearish as the pair is heading to test the 1.1132 support. The pair is clearly bearish in its 4-hour chart, with technical indicators heading firmly lower within negative levels.

Resistance: 1.1284, 1.1356, 1.1465

Support: 1.1132, 1.0995

GBPUSD (4-Hour Chart)

GBP/USD plunged on Thursday, suffering heavy losses and dropping to the 1.3300 area after Russia’s invasion of Ukraine. The pair remained under massive selling pressure and refreshed its monthly low near the 1.3310 mark, extending its heavy intraday losses heading into the American session. At the time of writing, Cable stays in negative territory with a 1.43% loss for the day, preserving its downside traction on renewed US dollar strength. Investors have abandoned their riskier assets and turned to safe-haven assets after Russian President Vladimir Putin authorized a special military operation in Donbas earlier in the day. A massive sell-off was also seen in the equity markets. The British pound is now undermined by the fact that the escalating tensions between Russia and Ukraine could dampen prospects for a 50 bps rate hike by the BoE at its March meeting.

On the technical side, the RSI is at 19 as of writing, suggesting that a trend reversal could be possible as the pair is in the oversold zone now. For the Bollinger Bands, the price is moving out of the lower band, indicating a strong trend continuation. In conclusion, we think the market will be bearish as the pair just dropped below the previous 1.3372 support. If bears can find constant strength below that level, short-term additional losses could be expected.

Resistance: 1.3522, 1.3636

Support: 1.3372, 1.3249, 1.3185

 

USDCAD (4-Hour Chart)

After Russia launched a full-scale invasion on Ukraine today, USD/CAD came under slightly upside momentum amid a stronger US dollar across the board. The pair witnessed fresh buying most of the day and reached the highest level since December 2021, now retreated slightly to surrender some of its daily gains. USD/CAD is trading at 1.2841 at the time of writing, rising 0.83% on a daily basis. Russian troops continue to cross the Ukrainian border and have reportedly destroyed Ukrainian military bases. Therefore, the worsening situation in Ukraine helped the greenback to find strong demand and pushed USD/CAD higher. However, surging crude oil prices had underpinned the commodity-linked Loonie and limited further gains for the USD/CAD pair. WTI advanced to around $100 a barrel for the first time in eight years, as concerns about disruptions on global oil supply elevated following the attack from Russia.

On the technical side, the RSI is at 69 as of writing, suggesting that the pair is technically oversold in the near term. As for the Bollinger Bands, the price has moved out of the upper band, so a trend continuation is possible. In conclusion, we think the market will be bullish as the pair is testing the 1.2843 resistance. On the upside, the pair could push lower toward 1.2900 if that resistance fails.

Resistance: 1.2843, 1.2939

Support: 1.2770, 1.2682, 1.2575, 1.2462