Markets are still in the process of re-basing after the price shocks of yesterday. However, when geopolitical events drive markets, it makes them far more unpredictable. Theoretically, the calming of tensions in the Ukraine should mean Euro up, Sterling up, equities up, gold down, yen down. We have seen evidence of this today but things can change quickly.
In the last few minutes, Euro and Sterling have moved slightly higher as President Putin has given a press conference about Ukraine, noting that there is no need to take troops into Ukraine “yet”. Risk appetite will benefit from Putin suggesting that Russia is not going to act as things stand.
EUR/USD is forming support above $1.3740 having found a low a $1.3719 overnight. However turning back from $1.3773 which was the old ceiling until Friday’s upside breakout, clouds the outlook a little. The daily chart suggests the outlook remains positive so I would be looking for a move above $1.3773 to be a buy signal.
GBP/USD is trading with increased volatility today. However, I will continue to concentrate on the $1.6700 big figure level which I view as a bit of a watershed. If Cable can build support above then I think that investors will begin to look higher once more.
USD/JPY still cannot breach 102.00 and the resistance band 102.00/102.20 remains the key level I am looking out for. The rate has moved slightly higher in the past few minutes with the press conference.
Gold has retraced 50% of the move higher from Friday. There is a band of support around $1335 to watch for. This is certainly a chart that needs further clarity over direction. On Friday there was the threat of a correction and it has only been the risk of escalating tensions in Ukraine that have pushed the price higher amid a flight to safety. But what happens if the risk premium is taken out of the price. If this insurance trade unwinds then downside pressure could return. It will be interesting to see how the chart of gold will be impacted and is one that I will be watching..