London 25/2/2022
The Russian attack in Ukraine has caused big and serious consequences to the financial markets. There is a strong risk-off mood and a negative investment sentiment that sends many investors to more secure assets and asset classes. In the very first hours after the invasion, the stock markets performed a huge correction and most of the commodities (including gold and oil) has a significant rise. In the currency pairs, investors favored the USD, as a more safe investment solution, compared to other, more risky currencies. The bond yields keep on consolidating and the US 10-year bond yield is oscillating around 2%. Soon enough though we saw a pullback and most of the stock markets recovered while gold and oil returned to the pre-attack prices. Under this market behavior, we conclude that markets were in a strong panic during the first hours of the attack but a bit later things seem more calm and quiet.
EURUSD (current price 1.1355) is very close to the last week’s closing price and this is because it had three different trends throughout the week: bearish on Monday, bullish on Tuesday & Wednesday, and bearish on Thursday & today. Both the USD and the EUR depend on the Russian/Ukrainian crisis lately and this crisis is changing the investing risk mood in general. The eurozone & Germany did not have a strong economic calendar during the last few days and the pair’s uptrend needs a solid breakout above 1.15 to prevail. On the contrary, a possible pullback below 1.1280 will give more credits to the bearish scenario.
GBPUSD (current price 1.3604) most likely will have a 3rd in a row bullish week. The recent interest rates hike from the Bank of England is still boosting the sterling, in combination with the weak USD of the last few days. The high rate of inflation (5.5% in January) in the UK creates extra hopes for more hikes in 2022 and the retail sales that rose by 9.1% in January reflect a good shape of the economy. The milestone for the uptrend continuation is the price area of 1.3750 and above these levels, we may the 1.40 coming closer.
USDJPY (current price 115.08) is trying to retain the price of 115 as it has performed a bearish movement this week, mostly on Thursday when the bond yields fell sharply. Some investors moved to the safe-haven asset JPY when the Ukrainian crisis worsened but earlier today, the Japanese inflation was released, carrying a surprise. The inflation rate was in January at 0.5%, lower than the markets’ expectations of 0.6% and much lower than the 0.8% of the previous month. That gives extra room to the Bank of Japan to keep its loose monetary policy and under this anticipation, the JPY should weaken. If the pair manages to stay above 115 then the target of many traders remains the important resistance at the 116.35 price area.
DISCLAIMER: The information produced by a-Quant is of a general nature only. It is not personal financial advice. It does not take into account your objectives, financial situation, and personal needs.
