Peace talks make little progress, global growth in focus
EUR/USD => The euro rises from a 20-month low
Gold => The commodity falls away from $2000
AUD/USD => The pair rises towards 115.50
EUR/USD edges higher ahead of GDP data
EUR/USD fell 0.7% yesterday, ending the day at 1.0852, having recovered from a fresh 20-month low of 1.08.
The euro plunged on stagflation fears following news that the US might ban Russian oil. However, the price recovered slightly after German Chancellor Olaf Scholz said that Germany would not support such a measure, perhaps not so surprising given how dependent Germany is on Russian energy.
Data from Germany yesterday was broadly upbeat, except for the more recent Eurozone Sentix investors’ confidence survey for March which dropped sharply to a 16-month low reflecting concerns over the fallout from the Russian invasion of Ukraine.
Today the pair is edging higher on fewer headlines from the Ukraine crisis. German industrial production and Q4 GDP, the third estimate are due.
|German retail sales
Eurozone Q4 GDP
|Actual: 2% (6.6%)
Expected: 0.3% (1.9%)
Where next for EUR/USD?
EUR/USD has been trading in a falling channel since
May last year, briefly hitting the upper band on February 10 and rebounding lower, falling through the 50 & 100 sma. The pair fell out of the lower band of the channel yesterday hitting a low of 1.08. However, the long lower wick suggests that the price failed to find acceptance at these lower levels. The RSI is very oversold, suggesting that the pair could be ready for a bounce or at least some consolidation. Buyers could look for a move over 1.10 the key psychological level ahead of 1.11 the late February and January low.
Meanwhile, support can be seen at 1.08 ahead of 1.0730 the low from March 2020.
Gold eases from $2000
Gold rose 1.5% yesterday, adding to 4.2% gains from last week, in a volatile start to the week.
The precious metal rallied as high as $2002, a level that was last seen in August 2020, as fears over stagflation and the Russian war drove safe have flows.
News that the US could ban Russian oil exports saw oil jump to a 14 year high, boosting demand for gold which is often considered a hedge against inflation.
Should the US decide to ban Russian oil imports, the Fed could be less likely to raise interest rates which are also favourable for non-yielding gold. Today Gold is edging lower on profit-taking after failure to take $2000 There is no high impacting US economic data today, Gold will likely be influenced by risk sentiment. A move above $205 could see the bulls run higher.
USD/JPY extends gains for a second day ahead of GDP data
USD/JPY rose 0.45% on Monday as the U.S. dollar was the safe haven of choice at the start of the week, as the market continued to monitor the Russian invasion of Ukraine.
Whilst the third round of peace talks ended with small advances, this failed to take the pressure off financial markets with the S&P 500 closing almost 3% lower. Fears of stagflation rocked risk sentiment after fears of sanctions on Russian oil sent the price to a 14 year high.
Today the pair continues to climb with Russia, Ukraine headlines in focus. While there is no high impacting US data, Japanese Q4 GDP figures could drive trade later in the session.
The economy is expected to confirm a rebound in the final three months of 2021.
|Japan Q4 GDP QoQ||Expected: 1.4% (3.8)||Previous: -0.7%|
Support can be found at 115.10 (50 sma) and 114.65 (last week’s low).
Resistance for the pair can be seen at 115.80 (last week’s high) and 116.35 (2022 high).