Market Focus

World equities again slid hard on Monday, following four consecutive weeks of declines as markets grew increasingly worried about higher energy prices and Russia-Ukraine tensions. The Dow Jones Industrial plunged more than 2% while the S&P 500 lost 3%, the worst day since October 2020. In the meantime, the Nasdaq 100 dropped 3.6% at the end of the day, officially heading into bear market territory.

The market continues to monitor the development of geopolitical tensions in Ukraine. Negotiations seem to have no evidence of improvements on the ceasefire between the two countries, with Ukraine saying that Moscow was seeking to manipulate the situation by only allowing civilians to evacuate to Belarus and Russia.

The energy price shock eased a bit as Germany allayed fears of an imminent Russian embargo. According to the Wall Street Journal, Germany won’t boycott Russian energy despite the war in Ukraine. Germany and perhaps other European countries are too dependent on Russian energy imports, especially since Germany is the world’s largest buyer of Russian natural gas.

Main Pairs Movement

The bullion remains bullish, trading slightly below $2,000, on Monday following the consideration of banning Russian oil and the existing war in Ukraine. As the war in Ukraine intensifies and the oil prices soar nearly double, the markets have taken shelter in the traditional safe-haven gold.

The US dollar index continues to edge higher above the 99 benchmark. As one of the safe havens, the US dollar has become a shelter for most investors in response to the fight against inflation, interest rate expectation, and uncertainty in Ukraine.

GBPUSD continues on the back foot of a 16-month low and is trading at 1.31142 at the time of writing. Reflecting the broad-based dollar strength, the British Pound is comparably weaker against the US dollar due to the safe-haven effect. Further price movement of the currency pair depends on the US CPI report later this week.

West Texas Intermediate oversteps $120 per barrel amid the potential ban on the imports of Russian oil and natural gas imposed by the US and the EU. The talk between Iran and the US will also become one of the main drivers for the price movement of oil.

Technical Analysis

GBPUSD (4-Hour Chart)

The British Pound started the week trading even lower as the seemingly unending conflict between Ukraine and Russia continues to loom over markets. Market participants fled to safe-haven assets at market open, thus boosting the Dollar despite lowering U.S. treasury yields. Prime Minister Borris Johnson has expressed his intent on further economic pressures on Russia. However, as leading Western Nations consider the ban on Russian oil, the ECB will face the extremely difficult question of soaring energy costs.

On the technical side, Cable has fallen through a multi-year support level at 1.3185. The next immediate level of support for Cable will sit at 1.2998, which formed 2 years prior during late 2020. RSI for the pair has dropped to oversold territory at 25.3 at the time of writing. Cable is currently trading below its 50, 100, and 200-day SMAs.

Resistance: 1.3185

Support: 1.2998, 1.2876

 

EURUSD (4-Hour Chart)

The euro started the week trading slightly higher against the Dollar despite a soaring Dollar. The recovery mounted by the shared currency seems weak, however. With a weak economic outlook coming from European investors and a dovish ECB, the Euro will continue to be relatively unattractive for market participants. On the economic docket, the ECB is due to release its monetary policy decision on Thursday.

On the technical side, EURUSD has defended against our previously estimated support level at 1.0839. Further downside support for the pair sits at 1.0766. RSI for EURUSD remains weak and is at 31.24 at the time of writing. EURUSD is currently trading below its 50, 100, and 200-day SMAs.

Resistance: 1.0946, 1.1127

Support: 1.0839, 1.0766

 

XAUUSD (4-Hour Chart)

Gold jumped at the start of trading for the new week and continued to trade higher over the course of the first half of the new trading week. XAUUSD broke the psychological barrier of $2000 twice amid tensions over Russia and Ukraine. XAUUSD has shown no signs of slowing down as global investors continue to hedge geopolitical risks with the precious metal. Furthermore, a stronger Dollar has failed to slow down the surge of Gold.

On the technical side, the $2000 price level has become the new resistance level, while $1959 seems to have formed as the new support level. RSI is at 65.64 as of writing. XAUUSD is trading well above its 50, 100, and 200-day SMAs.

Resistance: 1975, 2000

Support: 1920, 1900, 1885