Geopolitical tension testing investor nerves

Next 24 hours: Will cooler heads prevail?

Today’s report: Geopolitical tension testing investor nerves

The latest turn for the worse in the Russia-Ukraine crisis has resulted in a very clear move towards a reduction in risk appetite. The resulting flow has seen stocks under pressure and the US Dollar broadly bid.

Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

Setbacks have been well supported below 1.1200, with the market sharply reversing course and pushing back towards the yearly high. A clear break back above 1.1500 will suggest the market could be getting ready to turn back up. Inability to sustain above 1.1500 will keep the pressure on the downside.

  • R2 1.1500 – Psychological – Medium
  • R1 1.1495 - 10 February/2022 high – Medium
  • S1 1.1280 - 14 February high – Medium
  • S2 1.1267 – 2February low – Strong

EURUSD – fundamental overview

The Euro was weighed down in Monday trade on the escalation in tension around Russia and the Ukraine, which propelled a flight to safety into the Buck. Economic data out of the zone didn't help wither, with consumer confidence and construction output sliding. Key standouts on today’s calendar come in the form of German Ifo reads, US Case Shiller, US manufacturing PMIs, the Richmond Fed, and US consumer confidence.

EURUSD - Technical charts in detail

GBPUSD – technical overview

The market is in a correction phase in the aftermath of the run to fresh multi-month highs in 2021. At this stage, additional setbacks should be limited to the 1.3000 area ahead of the next major upside extension towards a retest and break of critical resistance in the form of the 2018 high. Back above 1.3835 takes pressure off the downside.

  • R2 1.3662 – 20 January high – Strong
  • R1 1.3644 – 10 February high – Medium
  • S1 1.3487 – 15 February low – Medium
  • S2 1.3434 – 1 February low – Medium

GBPUSD – fundamental overview

The Pound held up well on a relative basis on Monday, with the currency propped up on a very solid UK retail sales number. Key standouts on today’s calendar come in the form of German Ifo reads, US Case Shiller, US manufacturing PMIs, the Richmond Fed, and US consumer confidence.

USDJPY – technical overview

The longer-term trend is bearish despite the recent run higher. Look for additional upside to be limited, with scope for a topside failure and bearish resumption back down towards the 100.00 area. It would take a clear break back above 117.00 to negate the outlook.

  • R2 116.36 – 4 January high – Strong
  • R1 116.00 – Figure – Medium
  • S1 114.47 – 27 January low – Medium
  • S2 113.47 – 24 January low – Strong

USDJPY – fundamental overview

Escalating geopolitical tension around Russia and the Ukraine was responsible for risk off flow and a concurrent round of demand into the Yen. Key standouts on today’s calendar come in the form of German Ifo reads, US Case Shiller, US manufacturing PMIs, the Richmond Fed, and US consumer confidence.

AUDUSD – technical overview

The Australian Dollar has been in the process of a healthy correction following the impressive run towards a retest of the 2018 high in 2021. At this stage, the correction is starting to look stretched and setbacks should be well supported above 0.7000 on a weekly close basis. A weekly close below 0.7000 will force a bearish shift.

  • R2 0.7278 – 20 January high – Strong
  • R1 0.7216 – 17 February high – Medium
  • S1 0.6968 – 28 January/2022 low – Medium
  • S2 0.6921 – July 2020 low – Strong

AUDUSD – fundamental overview

Demand for commodities has helped to offset negative flow into the Australian Dollar from this latest bout of risk liquidation on the back of Russia-Ukraine tension. Key standouts on today’s calendar come in the form of German Ifo reads, US Case Shiller, US manufacturing PMIs, the Richmond Fed, and US consumer confidence.

USDCAD – technical overview

Finally signs of a major bottom in the works after a severe decline from the 2020 high. A recent weekly close back above 1.2500 encourages the constructive outlook and opens the door for a push back towards next critical resistance in the 1.3000 area. Any setbacks should be well supported into the 1.2200s.

  • R2 1.2814 – 6 January high – Strong
  • R1 1.2797 – 28 January high – Medium
  • S1 1.2560 – 26 January low– Strong
  • S2 1.2450 – 19 January low – Medium

USDCAD – fundamental overview

The Canadian Dollar has been getting some help from surging oil, but not enough to keep it from getting sold into rallies on risk off flow and a weaker Canada retail sales print. Key standouts on today’s calendar come in the form of German Ifo reads, US Case Shiller, US manufacturing PMIs, the Richmond Fed, and US consumer confidence.

NZDUSD – technical overview

Setbacks have intensified in recent weeks with the market trading down to fresh multi-month lows. A recent breakdown below the 0.6700 area opens the door for a drop towards 0.6500 in the sessions ahead.

  • R2 0.6728 – 24 January high – Strong
  • R1 0.6734 – 21 February high – Medium
  • S1 0.6530 – 28 January/2022 low – Medium
  • S2 0.6500 – Psychological – Medium

NZDUSD – fundamental overview

Demand for commodities has helped to offset negative flow into the New Zealand Dollar from this latest bout of risk liquidation on the back of Russia-Ukraine tension. Key standouts on today’s calendar come in the form of German Ifo reads, US Case Shiller, US manufacturing PMIs, the Richmond Fed, and US consumer confidence.

US SPX 500 – technical overview

Longer-term technical studies are in the process of unwinding from extended readings off record highs. The latest breakdown below 4,272 opens the door for the next major downside extension towards 3,500. Back above 4,612 will be required at a minimum to take the immediate pressure off the downside.

  • R2 4612 – 19 January high – Strong
  • R1 4490 – 16 February high – Medium
  • S1 4254 – 22 February low – Medium
  • S2 4220 – 24 January/2022 low – Strong

US SPX 500 – fundamental overview

With so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, ongoing worry associated with coronavirus fallout, rising inflation, and geopolitical tension should weigh more heavily on investor sentiment in Q1 2022.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1700.

  • R2 1917 – 1 June high – Strong
  • R1 1915 – 22 February high – Medium
  • S1 1753 – 15 December low – Medium
  • S2 1722 – 29 September low – Strong

GOLD (SPOT) – fundamental overview

The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about exhausted monetary policy, extended global equities, and coronavirus fallout. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.

Peformance chart: 30 Day Performance vs. US dollar (%)

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