Russia invasion risk reins Euro

  • The risk of Russia invading Ukraine weighs on Euro and favors the safe haven US dollar.
  • The soaring inflation reading of last week also weighs on the market sentiment, favoring the safe haven – USD.
  • European Central Bank’s (ECB) Olli Rehn warned that overreaction to inflation by the central bank could stem the economic growth.

 

The Safe haven US dollar rose against the riskier ones like Euro which struggled for traction on Monday, as market edge about the prospect of war in Europe and with the alarmingly high US inflation readings last week.

US president Joe Biden and Russian president Vladimir Putin talked by phone for an hour on Saturday which is largely seen as a last-ditch effort to defend from Russian invasion of Ukraine. But Neither side said there had been any breakthroughs. A senior Biden administration official said the call was professional and substantive, but that there was no fundamental change. The senior Biden administration official said it was unclear whether Putin was committed to diplomacy even as he agreed to stay in touch with Biden. The official also said ”Russia may decide to proceed with military action anyway.”

This recent news adds risk in the market which was already evident in markets’ volatile response to hotter-than-expected U.S. inflation data last week, which rushed the market to bets on the Federal Reserve to lift rates more than 160 basis points before the end of the year.

Analysts at Westpac said “With Fed hike expectations surging again and geopolitical tensions in Ukraine escalating dramatically the dollar index should be back on the front foot again.”

On the other hand, On Saturday, European Central Bank’s (ECB) Governing Council Member Olli Rehn warned in an interview that overreaction to inflation by the central bank could stem the economic growth. He said “If we reacted strongly to inflation in the short term, we would probably cause economic growth to stop,” “It’s better to look beyond short-term inflation and look at what inflation is in 2023, 2024.” “We will have time to react in the March meeting and in later meetings if it looks like the situation is markedly different than it now appears.”

EUR/USD 4 Hour Chart:

Support: 1.1307 (S1), 1.1268 (S2), 1.1207 (S3).

Resistance: 1.1408 (R1), 1.1469 (R2), 1.1508 (R3).

The Anxious start of the trading week due to soaring inflation and the risks of a Russia invasion of Ukraine favors the safe haven asset US dollar against the Riskier asset – Euro. We expect a bearish trend for EUR/USD.

BTC/USD Weekly Forecast (14th February 2022 – 18th February 2022)

Fundamental view:

Bitcoin initially rallied against the greenback but later gave up some of its gains, However it managed to form a bullish weekly candle. The US dollar bulls was favored by the stronger than expected CPI data.   The US reported the January Consumer Price Index, which soared to 7.5% YoY against the forecast of 7.2%,and the jump was the highest level since February 1982. This made the market rush to priced a 50 bps rate hike in March.

On the other hand, Recent news of bill passed by Canada favoring crypto and Billionaire Bill Miller views on Bitcoin seems to underpin the uptrend of Oldest crypto – Bitcoin. A bill has been introduced in Canada to encourage the growth of the crypto sector. “Canada should be attracting billions of dollars in investment in the fast growing crypto asset industry. Today I introduced a bill, the first of its kind in Canada, to make sure this becomes a reality,” said the parliament member who introduced the bill. Veteran investor and fund manager Bill Miller says he has “a very big position” in bitcoin and expects to see a lot of institutional adoption this year, particularly among endowments and foundations. “Bitcoin is insurance against financial catastrophe,” he opined.

The major economic events deciding the movements of the pair in the next week are NY Fed Empire State Manufacturing Index at Feb 15, Retail Sales monthly report, EIA Crude Oil Stocks Change, FOMC Minutes at Feb 16, Initial Jobless Claims, Philadelphia Fed Manufacturing Index at Feb 17, Existing Home Sales at Feb 18 for US.

BTC/USD Weekly outlook:

Technical View:

Last week’s high was 8.05% higher than the previous week. Maintaining high at 45806.9 and low at 41517.1 showed a movement of 4289 pips.

In the upcoming week we expect BTC/USD to show a bearish trend. The Instrument is trading above the 200 Simple Moving Average and the MACD trades to the downside. Should 40689.2 proves to be unreliable support then the pair may fall further to 38958.3 and 36399.4 respectively whereas a solid breakout above 44979.0 will open a clear path upward to 47537.9 and then will further raise up to 49268.8. In H4 chart double top pattern breakout favors prospects of a bearish trend. Bearish engulfing pattern constructs a bearish outlook for the pair in the upcoming week.

Preference
Sell: 42437.9 target at 38247.6 and stop loss at 44984.5

 

Alternate Scenario
Buy: 44984.5 target at 49267.8 and stop loss at 42437.9

XAU/USD Weekly Forecast (14th February 2022 – 18th February 2022)

Fundamental view:

The yellow metal traded high against the US dollar with skyrocketing on the last day of the trading week. Gold was trading to the upside during the initial 3 days of the week taking advantage of weak dollar but on Thursday it tumbled due to the US dollar gaining strength with stronger than expected inflation data.  However, Gold bounced back on Friday due to geopolitical developments concerning the Ukraine – Russia conflicts. The US reported the January Consumer Price Index, which soared to 7.5% YoY against the forecast of 7.2%,and the jump was the highest level since February 1982. This led to the market expectation that the Fed might adopt a more aggressive policy stance to combat high inflation and market priced for a 50 bps rate hike in March.

On the geopolitical front, According to a PBS NewsHour reporter, “the US believes that Russian President Vladimir Putin has decided to invade Ukraine and already communicated those plans to the Russian military. Two Biden administration officials said they expect the invasion to begin as soon as next week.” This created the cautious market sentiment which favored the safe haven precious metal.

The major economic events deciding the movements of the pair in the next week are NY Fed Empire State Manufacturing Index at Feb 15, Retail Sales monthly report, EIA Crude Oil Stocks Change, FOMC Minutes at Feb 16, Initial Jobless Claims, Philadelphia Fed Manufacturing Index at Feb 17, Existing Home Sales at Feb 18 for US.

XAU/USD Weekly outlook:

Technical View:

Last week’s high was 2.70% higher than the previous week. Maintaining high at 1865.3 and low at 1806.0 showed a movement of 593 pips.

In the upcoming week we expect XAU/USD to show a bullish trend. The Instrument is trading above the 200 Simple Moving Average and the MACD trades to the upside. A solid breakout above 1880.2 may open a clean path towards 1902.4 and may take a way up to 1939.5. Should 1820.9 prove to be unreliable support, the XAUUSD may sink downwards 1783.8 and 1761.6 respectively. In H4 chart pennant pattern breakout favors prospects of a bullish trend. Also to be noted Bullish engulfing formation exerts the expectation of uptrend for the pair.

Preference
Buy: 1857.5 target at 1909.9 and stop loss at 1815.7

 

Alternate Scenario
Sell: 1815.7 target at 1762.6 and stop loss at 1857.5

AUD/USD Weekly Forecast (14th February 2022 – 18th February 2022)

Fundamental view:

The Australian dollar traded high against the American dollar during the trading course of this week, despite of the broad US dollar strength. The US reported the January Consumer Price Index, which soared to 7.5% YoY against the forecast of 7.2%,and the jump was the highest level since February 1982. This led to the market expectation that the Fed might adopt a more aggressive policy stance to combat high inflation and market priced for a 50 bps rate hike in March which helped the USD bulls but the Aussie managed to trade upside.  However, the bullish momentum remains capped for the quote – AUD/USD due to the prevailing cautious sentiment which will weigh on the perceived riskier Aussie. Nevertheless, the pair remained on track and posted the second successive weekly gains.

Australia NAB Business Confidence on 8th February and US CPI MoM and YoY report on 11th February framed downtrend whereas Australia Retail Sales quarterly report on 7th February and US Michigan Consumer Sentiment on 11th February favored uptrend for the pair.

The major economic events deciding the movement of the pair in the next week are RBA Meeting Minutes, NY Fed Empire State Manufacturing Index at Feb 15, US Retail Sales monthly report, EIA Crude Oil Stocks Change, FOMC Minutes at Feb 16, Australia Employment Change, Initial Jobless Claims and US Philadelphia Fed Manufacturing Index at Feb 17.

AUD/USD Weekly outlook:

Technical View:

Last week’s high was 1.12% higher than the previous week. Maintaining high at 0.7248 and low at 0.7065 showed a movement of 183 pips.

In the upcoming week we expect AUD/USD to show a bearish trend. The currency pair is trading below the 200 Simple Moving Average and the MACD trades to the upside. Should 0.7048 proves to be unreliable support then the pair may fall further to 0.6965 and 0.6865 respectively whereas a solid breakout above 0.7231 will open a clear path upward to 0.7331 and then will further raise up to 0.7414. In H4 chart rising wedge pattern breakout favors prospects of a bearish trend. Also to be noted bearish engulfing formation exerts the expectation of downtrend for the pair.

Preference
Sell: 0.7129 target at 0.6966 and stop loss at 0.7236

 

Alternate Scenario
Buy: 0.7236 target at 0.7413 and stop loss at 0.7129