The US Dollar has retained a bullish stance as prospects of a rate hike and an increase in risk-off sentiment supported the safe haven US Dollar.
Following a week of unrest, heightened with geopolitical risks with the Ukraine – Russia conflict, and raised volatility; the USD climbed higher against most major currencies as investors sought shelter in the US Dollar’s safe-haven appeal.
The NATO alliance countries and the EU have responded by closing airspace to Russian aircrafts, sanctioning Russian leaders and businesspersons, and removing certain Russian banks from the SWIFT payments system. These measures will certainly cause Russia economic damage, with the Ruble likely to end up artificially pegged by the Russian government to the US Dollar and Euro when Forex markets open tonight.
The Russian stock market dropped almost half its value after news of the invasion broke before trading was suspended. However, it is remarkable that the US and other allied nations are still buying Russian oil and trade with Russia is continuing. Nevertheless, these developments are likely to set a chill on Europe, and we saw the Euro weaken a little over the course of last week.
It should be noted that events in eastern Europe have the potential to worsen significantly and could lead to a clash between NATO and Russia which would almost certainly cause strong risk-off moves in markets.
Looking forward, is likely to see a higher or comparable levels of volatility compared to last week, with the direction of markets unclear beyond a strong US Dollar. Furthermore, there are a few economic data releases due this week, in order of importance:
- US Non-Farm Payrolls and Employment Change
- Bank of Canada Overnight Rate and Rate Statement
- Canadian GDP
- RBA Cash Rate & Rate Statement
- Australian GDP
- US ISM Manufacturing PMI
Major Currencies Performance and Signals
EUR/USD
The Euro has had a wild ride over the course of the month of February, and now that we are closing out the month, we seem just as confused as we were in the beginning. The EU seems somewhat united with Ukraine in the Russian conflict which is good for Euro but in general we expect the price to range.
FORECAST: NEUTRAL
Resistance: 1.1300, 1.1350, 1.1400
Support: 1.1250, 1.1200, 1.1150
GBP/USD
After ricocheting off the 38.2% Fibonacci retracement level of the 2018 – 2020 move at 1.324, GBP/USD bulls managed to drive prices higher. Same as Euro we expect uncertainty because of the War in Ukraine always checking the Friday’s NFP number.
FORECAST: NEUTRAL
Resistance: 1.3450, 1.3500, 1.3550
Support: 1.3400, 1.3350, 1.3300
AUD/USD
The Ukraine-Russia crisis had a limited impact on the Aussie, despite stocks plummeting. The Reserve Bank of Australia is having a monetary policy meeting next Tuesday. The AUDUSD pair is up for a fourth consecutive week and looking to reach fresh 2022 highs.
FORECAST: NEUTRAL
Resistance: 0.7250, 0.7300, 0.7350
Support: 0.7200, 0.7150, 0.7100
USD/JPY
The major currency pair printed a bullish price last week which ended the week at the highest weekly close for 5 years. The candlestick was also a bullish engulfing candlestick. We expect the US Dollar to increase.
FORECAST: BUY
Resistance: 116.00, 116.50, 117.00
Support: 115.50, 115.00, 114.50
USD/CAD
Even though the oil markets are ready to break higher given enough time, the reality is that the US dollar continues to attract a lot of inflows. That should continue to be the case on dips going forward.
FORECAST: SELL
Resistance: 1.2750,1.2800, 1.2850
Support: 1.2700, 1.2650, 1.2600
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