What are we looking at today:
- Market sentiment more positive: Apparent progress in peace talks over the weekend have lifted market sentiment today. However, this could very easily be built on a house of cards.
- The progress of peace talks: Russia and Ukraine are again talking today about how to end the war. Markets are higher for now, but how sustainable this is highly uncertain
- Data trading: No major data due.
Market sentiment is looking more positive on Monday morning, with European assets seeing a strong uplift. The mood has been improved following apparently constructive negotiations between Russia and Ukraine over the weekend. For now, markets are happy to run with the better news, but there are will be significant caution over how genuine the intentions are from the Russian side to bring an end to the conflict.
European focused assets are benefitting the most from this sentiment shift this morning. The DAX is leading equity markets higher, whilst the EUR is slightly outperforming on major forex. The other key move is to the downside on commodities. This is weighing on the outlook of the Aussie and Kiwi this morning.
There is little interest for data traders on the economic calendar today. However, it is worth noting that the US has made the Daylight Saving Time shift, so any US or Canadian data will be released an hour earlier for traders outside North America this week.
Sentiment is looking better: Especially for European assets on Monday morning, with the DAX outperforming major indices and the EUR outperforming major forex. Commodity prices are also falling, which plays into improved sentiment.
Treasury yields continue to move higher: With less of a haven flow, bonds are again being sold off this morning. The US 10 year yield is close to the 2.065% February high which was the highest since July 2019.
Russia/Ukraine talks: Progress was supposedly achieved over the weekend, with talks continuing on Monday morning. There will be hope that this is a genuine intention from Russia to bring an end to the conflict in a diplomatic solution.
Shelling of Ukraine continues: Despite these talks, the Russians continue to step up their bombardment of Ukraine, with explosions now hitting the capital of Kyiv.
Russian bond default gets closer: Russia owes $117m on two dollar-denominated bonds on Wednesday. If it fails or attempts to repay in Ruble then it would be a default.
Cryptocurrency finds support: Bitcoin has rebounded and is back around $39,000. Supportive comments from Elon Musk have helped, with the tech mogul saying that he won’t sell his Bitcoin, Etherium or Doge.
- There is no major data due today
Major market outlook
Broad outlook: Sentiment has recovered after a late sell-off on Wall Street into the close on Friday. European assets are outperforming, whilst commodities are falling.
Forex: EUR is recovering, whilst AUD and JPY are the main underperformers.
- EUR/USD fell decisively for a second session on Friday but has looked to recover from 1.0900 this morning. Reaction around the initial pivot at 1.0960 will be a gauge but a move above 1.1040 (Friday’s lower high) is needed for a sustainable technical recovery. Support of the recent low at 1.0805 remains key.
- GBP/USD fell sharply again on Friday but has held on to the psychological 1.3000 support, for now. A rebound into the European session from lows overnight has left support at 1.3010 but this remains the lowest since November 2020. Initial resistance at 1.3050 is being tested, but there is considerable overhead supply around 1.3080 with Friday’s high at 1.3125.
- AUD/USD fell sharply on Friday and is again lower today (as commodity prices fall). An initial breach of the support at 0.7245 has been recovered, but a close under 0.7245 would be a corrective signal. Near-term charts starting to look more corrective shows that this is an important phase for the outlook.
Commodities: Precious metals are sliding back in their consolidations again. Furthermore, oil is also slipping back towards recent lows.
- Gold has formed a series of lower daily highs for the past few sessions and is again falling away today. A test of the $1958 support (from Friday’s low) will be the gauge for today, but a retreat to the five-week uptrend (today at $1946) is increasingly likely. Initial resistance is now $1990/$1995.
- Silver continues to lose the positive momentum and a drift back towards support at $25.30 is increasingly likely, along with a test of the five-week uptrend (today at $25.10). The resistance is growing in importance at $26.05. The initial resistance is at $25.74.
- Brent Crude oil is looking less volatile in recent sessions and is once more drifting back lower this morning. A series of lower highs is forming in a move that is consistently coming back towards support at $107.30/$108.35. daily RSI is now at its lowest since December.
Indices: Indices are trending higher in a recovery of the past week, with the DAX outperforming.
- S&P 500 futures saw a false breakout on Friday and subsequently unwound sharply lower. The market has found support at 4198 and is edging higher this morning. However, the moves look tentative so far and the false breakout is a concern for the bulls. Support at 4198 is therefore key.
- DAX has started the week strongly to continue the uptrend of the past week. However, the resistance around 14,125 needs to be broken sustainably for a significant recovery to take hold. The support at 13,275 is increasingly important. Initial support at 13,680 this morning.
- FTSE 100 has also been trending higher, but the move looks more tentative. Initial support at 7101 will be a gauge for the recovery momentum, whilst if support at 7051 is broken, it would re-open the downside. A close above 7264 would be bullish near term.