Market Focus

US markets were mixed on Monday, kicking off an important week as talks between Russia and Ukraine continue amid the upcoming FOMC rate decision. The Dow Jones Industrial Average finished flat while the Nasdaq Composite slid 2.04% and the S&P fell 0.7%. Both the S&P 500 and the Nasdaq Composite finished their seventh negative trading session in the past eight weeks.

Several tech companies were down sharply on Monday as a Covid-19 outbreak in China spurred the concerns that restrictions might come once again, hurting the existing supply chain. Apple Inc. was down 2.6%, while Intel was down 3.1%. Over the weekend, China’s government has ordered a lockdown in Shenzhen, a city of 17.5 million residents. In the meantime, all businesses in the tech and finance hubs in Hong Kong were ordered to close or work from home.

The FOMC meeting is happening this week, and the Fed is anticipated to start unwinding the massive economic aid that was provided during the pandemic. Amid the Ukrainian crisis, the Fed is widely expected to raise interest rates on Wednesday in response to unprecedented inflation. Rates are expected to rise by a quarter percentage point or 25 basis points on Wednesday.

Main Pairs Movement

WTI slid 5.7% and gold slipped 1.2% per ounce on Monday amid the developments of the Russia-Ukraine conflict. As the markets assess the current tension in Ukraine, the focus has shifted to the coming results of FOMC monetary policy.

EURUSD pulled back from weekly lows on Monday, finishing with 1.09396. The eurodollar was slightly preferable to the US dollar as the Wholesale Price Index was better than expected, up 16.6%, in Germany.

GBPUSD was down 0.28% and trading at 1.30013. The British Pound was weaker on intensifying fears of China’s bailout to Russia. The US dollar index was moving slightly above 99 following a 2% increase in the 10-year bond.

Technical Analysis

GBPUSD (4-Hour Chart)

The pound started the new week trading lower during the Asian trading hours. Better market sentiment was reflected in the equity markets as U.S. equity futures rose steadily at the start of the new trading week. On the economic docket, the Federal Reserve’s FOMC is set to release its interest rate decision, which is expected by market participants to be a 25 basis point hike in U.S. benchmark interest rates; furthermore, the ECB is set to announce its interest rate decision on the same day as well.

On the technical side, Cable continues to trade between the range of 1.3018 and 1.3096. Our previously estimated support level at 1.3018 remains firm. RSI for Cable was last seen at 39.74. Cable currently trades below its 50, 100, and 200-day SMAs.

Resistance: 1.3185

Support: 1.2998, 1.2876

EURUSD (4-Hour Chart)

Amid revived optimism for the tension between Ukraine and Russia, market participants have rekindled a bullish run for the euro. However, with the Federal Reserve set to announce its interest rate policy later this Thursday the Euro-Dollar pair could again see strong selling pressure. Interest rate differentials between the U.S. and the ECB will continue to attract market participants to the Greenback.

On the technical side, EURUSD rebounded strongly from our estimated support level at 1.0893. A new immediate resistance level has formed around the 1.1003 price region. RSI for the pair sits at 52.68, as of writing. Currently, EURUSD trades above its 50 day SMA, but below its 100 and 200-day SMAs.

Resistance: 1.1003

Support: 1.0893, 1.0845

XAUUSD (4-Hour Chart)

Gold met fresh selling pressure at the beginning of the new trading week. Revived optimism for the tension between Ukraine and Russia triggered continued selling off of the precious metal. As of writing, XAUUSD is consolidating around the $1956 per ounce price region. With gold and the Greenback still the world’s dominating safe-haven assets, prices of XAUUSD could largely fluctuate should an agreement between Ukraine and Russia come to fruition later this week.

On the technical side, XAUUSD could not find the momentum to break through the $2000 resistance level. Our previously estimated $1961 support level also remains weak, while further down support level is projected to be around the $1918 per ounce price region. RSI for XAUUSD is currently at 40.48. Gold is currently trading below its 50-day SMA, but above its 100 and 200-day SMAs.

Resistance: 1999

Support: 1961, 1918