Daily market analysis

February 14, 2022

Market Focus

U.S. equity futures wavered early Monday and stocks appeared set for a cautious open as investors assessed geopolitical worries about Ukraine that sparked risk aversion at the end of last week. Dow Jones dropped 1.43% to 34738.06 during Friday’s trades, while tech-heavy Nasdaq slumped worse, closed 2.78% lower than its Friday’s open.

Tensions over Russia’s military buildup near Ukraine are entering a potentially decisive week, with the U.S. warning an invasion may be imminent and President Vladimir Putin accusing America of failing to meet his demands. U.S. National Security Advisor Jake Sullivan, who on Friday cited the risk that Russia will attack or seek to ignite conflict within Ukraine this week, told CNN on Sunday there’s “a distinct possibility that there will be major military action very soon.”

The U.S. and its European allies have been pressing Putin for weeks to pull back an estimated 130,000 troops massed near Ukraine, but a frenzy of diplomatic activity — including key leaders cycling through Moscow for talks with Putin — has failed to produce an off-ramp.

A phone call on Saturday between Putin and U.S. President Joe Biden that went for just over an hour saw them reiterate their positions without any apparent progress. Russia has repeatedly denied it plans to invade its neighbor and Russian officials accuse the U.S. of stoking “hysteria.”

Even as the U.S. and Europe threaten what they say would be severe economic penalties for Moscow, there are differences about how heavily to respond, especially for countries like Germany that rely on imports of Russian gas. Cutting Russia off from the global payments system known as Swift is highly unlikely. And Biden has said he would not send U.S. troops into Ukraine in the event of a conflict.

Main Pairs Movement:

After Thursday’s rally amid record CPI data, US bond’s yield slumped heavily as a strong correction shocked during Friday’s trading. Despite the declining yields, the dollar index still close the day in green, up 0.25%, but volatility was enlarged during the intraday trades.

With a stronger greenback, most its peers suffered losses on Friday. The Euro pair plummeted 0.72% to 1.1345, while the Cable defended its previous levels, closing the day in mere losses at 1.3514. Earlier on Thursday, the European Commission raised its inflation forecast for this year from 3.5%, but still expects inflation to fall to 1.7% in 2023.

Gold surged a significant 1.77% to $1,858.98 a troy ounce, even once topped at $1,865.47, a level last seen in November 2021. Crude oil prices also bounced hugely amid the market fear of Russia-Ukraine conflict escalation. With WTI closed 4.27% higher at $93.88 a barrel and Brent up 3.92% to $94.94.

Technical Analysis:

EURUSD (4-Hour Chart)

The EUR/USD pair declined on Friday, extending its slide to 1.1390 area post-US CPI report. The pair was trading lower and dropped to a daily low below 1.1380 level, but then bunce back slightly to erase some of its intraday’s losses. The pair was last seen trading at 1.1387, posting a 0.35% loss on a daily basis. EUR/USD stays in the negative territory amid rebounding US dollar, as investors continue to evaluate the recent multi-decade high in US inflation in January, which might adds pressures on the Fed to tighten monetary policy. In Europe, the data from Germany showed that Final Germany CPI came at 0.4% MoM in January, matching market expectations. Meanwhile speculations of a potential rate hike by the ECB at some point by year end could limit the losses for EUR/USD.

For technical aspect, RSI indicator 46 figures as of writing, suggesting that the downside is more favored as the RSI stays below the midline. As for the Bollinger Bands, the price is moving alongside the lower band, which indicates that the pair could remain its downside traction. In conclusion, we think market will be bearish as long as the 1.1480 resistance line holds. EUR/USD could extend its slide toward 1.1350 amid the bearish shift in RSI indicator.

Resistance: 1.1480, 1.1600

Support: 1.1323, 1.1284, 1.1132

GBPUSD (4-Hour Chart)

The pair GBP/USD edged higher on Friday, attracting some dip-buying amid modest US dollar weakness. The pair was surrounded by bearish momentum and touched a daily low during Asian session, but start to see fresh buying while recovering its daily losses. At the time of writing, the cable stays in positive territory with a 0.38% gain for the day, continuing to climb higher amid renewed US dollar weakness. Retreating US Treasury bond yields undermined the greenback, which consolidates its daily losses heading into the weekend. For British pound, UK GDP data, which showed that the economy expanded by 1% during the fourth quarter of 2021, coming in slightly lower than the market expectation. But the number failed to provide trading impetus to the cable.

For technical aspect, RSI indicator 58 figures as of writing, suggesting bull movement ahead. As for the Bollinger Bands, the price keeps heading north and just moves out of the upper band, so a strong trend continuation can be expected. In conclusion, we think market will be bullish as the pair is heading to test the 1.3633 resistance line. If the pair rise above that level, it could push higher toward 1.3700 mark. And the 1.3512 level had provided firm support to the cable.

Resistance: 1.3633, 1.3739

Support: 1.3512, 1.3456, 1.3372

USDCAD (4-Hour Chart)

After previous day’s rally to 1.2750 area, the pair USD/CAD failed to preserve its bullish momentum and retreated from a weekly high amid weaker US dollar across the board. The pair started to see fresh selling after European session started, now remaining under pressure below 1.2700 mark. USD/CAD is trading at 1.2689 at the time of writing, losing 0.26% on a daily basis. The greenback was dragged down by retreating US Treasury bond yields, as the DXY index pulled back to 95.70 area. On top of that, surging crude oil prices also underpinned the commodity-linked loonie, as markets believe that global oil supply would remain tight. Meanwhile the conflict between Russia and Ukraine might keep acting as a tailwind for black gold. WTI revisits $91 again and posts a 1.58% gain on a daily basis.

For technical aspect, RSI indicator 47 figures as of writing, suggesting that the pair could extend its downside movement as the RSI keep heading south. As for the Bollinger Bands, the price cross below the moving average and drop towards the lower band, indicating a continuation of the downside traction. In conclusion, we think market will be bearish as the pair is heading re-test the 1.2665 support, a break below that level could open the door for additional losses.

Resistance: 1.2778, 1.2829

Support: 1.2665, 1.2575, 1.2462

Economic Data:

No major events scheduled today.