The surge in gold and oil following the Russian invasion, stocks and the fall of the euro

Russia’s invasion of Ukraine remains the dominant theme in the markets today. The safe haven flow pushes gold to the highest level in over a year, heading towards the 2k handle. WTI Crude Oil also breaks above the 100 level, rising as it does in geopolitical tensions. In the currency markets, the yen and the dollar are mostly the strongest, followed by the Swiss franc. The Euro and British Pound are weakest with the Kiwi. Aussie and Loonie are weak too, but not as bad as Euro and Pound.

Technically, the Yen seems to have a slight advantage against the Swiss Franc in the current risk aversion trade, with CHF/JPY notably dipping today. The immediate focus will be on the short term trendline (now at 124.01) and support at 123.52. A firm breakout of this area will complete a head and shoulders pattern (ls: 125.48; h: 127.05; rs: 125.56). In this case, CHF/JPY would likely dip further towards the long-term channel support (now at 120.23), before finding a bottom.

In Europe, at the time of writing, the FTSE is down -2.84%. The DAX is down -4.54%. The CAC is down -3.90%. Germany’s 10-year yield is down from -0.0843 to 0.145. Earlier in Asia, the Nikkei fell -1.81%. Hong Kong’s HSI index fell -3.21%. China Shanghai SSE fell -1.70%. The Singapore Strait fell -3.45%. Japan’s 10-year JGB yield fell from -0.0110 to 0.187.

Gold Targets 2074 High in Case of Bullish Acceleration

Gold’s rally continues today and continues, 100% projection from 1682.60 to 1877.05 from 1752.12 to 1946.57. This is a clear sign of upward acceleration. Either way, the outlook will remain bullish as long as the resistance at 1913.79 becomes support. The next target is a projection of 161.8% at 2066.74, which is close to the 2074.84 high.

Also, the likelihood of a resumption of the long-term uptrend increases with the current rally. At the break of 2074.84, the next medium term target will be a 61.8% projection from 1160.17 to 2074.84 from 1682.60 to 2247.86.

WTI Oil crosses 100 mark with upward acceleration, 107.4 next

WTI Crude Oil is surging as Russia began invading Ukraine, and is now above 100 handfuls. In the short term, the outlook will remain bullish as long as the 95.98 resistance becomes support. The next target is a 61.8% projection from 66.46 to 95.98 from 89.23 to 107.43.

Note that the 4 hour MACD is clearly indicating that it is accelerating up. A firm break of 107.43 could lead to further acceleration towards a 100% projection at 118.75.

US initial jobless claims fell to 232,000, continuing claims fell to 1,476 million

U.S. initial jobless claims fell -17,000 to 232,000 in the week ending Feb. 19, slightly below expectations of 239,000. The four-week moving average for initial claims fell by -7,000 to 236,000.

Continuing claims fell -112,000 to 1,476,000 in the week ending February 12, the lowest since March 14, 1970. The four-week moving average for continuing claims fell from -49,000 to 1 576,000, the lowest since June 30, 1973.

US GDP grew 7% annualized in Q4

According to the second estimate, US GDP grew at an annualized 7.0% in the fourth quarter. The raise of Real GDP mainly reflected increases in private investment in inventory, exports, PCE and non-residential fixed investment that were partly offset by decreases in federal, state and local government spending. Imports, which are a subtraction in the calculation of GDP, have increased.

ECB Stournaras: asset purchases should continue until the end of the year

ECB Governing Council member Yannis Stournaras said in an interview with Reuters that the asset purchase program should continue at least until the end of the year, to cushion the fallout from the Ukrainian crisis.

He said: “Judging the situation from today’s perspective, I would prefer a continuation of the APP at least until the end of the year, beyond September, rather than bringing the end closer … I would not be in favor of announcing the end of the APP in March.

Stournaras added that the crisis
was expected to lower prices “in the medium to long term” after an initial spike. “In my view, this is going to have an inflationary effect in the short term – that is, prices will rise due to rising energy costs,” he said. “But in the medium to long term, I think the consequences will be deflationary through negative trade effects and of course through rising energy prices.”

BoJ Kuroda: No immediate plans to reduce stimulus

BoJ Governor Haruhiko Kuroda told parliament: “Unlike Western countries, we have no immediate plans to reduce our monetary stimulus.” But the central bank will continue to monitor inflation expectations. “We will not only look at price indicators, but also surveys showing what the public thinks about price movements,” he added.

Regarding the exchange rate, Kuroda said, “If the yen weakens further, it could push up import costs. But the recent rise in import costs is mainly due to an increase in commodity prices denominated in dollars, rather than a weak yen.

“It is desirable that exchange rates move in a stable manner, reflecting economic fundamentals. I think the recent movements (in yen) are in line with this trend,” Kuroda added.

EUR/USD mid-day outlook

Daily pivots: (S1) 1.1283; (P) 1.1321; (R1) 1.1341; Continued…

EUR/USD falls as low as 1.1147 so far today and the intraday bias remains bearish for the 1.1120 low. A decisive break will confirm the resumption of a larger downtrend from 1.2348. The next target is a 61.8% projection of 1.2265 to 1.1120 from 1.1494 to 1.0786. For now, the risk will remain on the downside as long as the support at 1.1287 holds, in case of recovery.

Overall, the decline from 1.2348 (2021 high) is seen as a leg inside the range pattern from 1.2555 (2018 high). A sustained trade above the 55-week EMA (now at 1.1593) will signal that it is over and a stronger rise would pull back towards the top of the range between 1.2348 and 1.2555. However, a firm break of 1.0635 (2020 low) will increase the chances of a resumption of the long-term downtrend and target a retest at 1.0339 (2017 low) thereafter.

Economic Indicators Update

GMT Ccy Events Real Forecast Previous amended
00:30 USD Private capital expenditure Q4 1.10% 2.90% -2.20% -1.10%
13:30 USD Initial unemployment insurance claims (February 18) 232K 239K 248K 249K
13:30 USD Annualized GDP Q4 P 7.00% 7.10% 6.90%
13:30 USD Q4 P GDP price index 7.10% 6.90% 6.90%
15:00 USD New Home Sales M/M Jan 803K 811K
15:30 USD Natural gas storage -137B -190B
4:00 p.m. USD crude oil inventories -1.0M 1.1M

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