What we are looking at today:

  • Market sentiment picks up: Despite Wall Street falling sharply into the close, European markets have started the day in a relatively upbeat fashion. The question is just how long this lasts before the next wave of selling pressure.
  • The continued rise in commodities prices: The rise in metals prices and the subsequent impact on inflation in the coming months.  
  • Data trading: Eurozone GDP is a final reading so is unlikely to make little impact on EUR. The US trade balance is later but may only have a marginal influence on USD moves.


Markets are reacting to two factors now. The direct news flow surrounding the Ukrainian war is lending a broad negative feel to markets. However, the secondary impact is through the sharp rise in commodities prices. With the price of commodities such as energy, metals, and wheat all rising sharply, this paints a dark picture of stagflation in the months to come. 

Despite this backdrop, major markets have come into the European session in a relatively upbeat mood. Selling pressure has eased on indices and there is a retracement on many of the trending moves of recent sessions, or the time being at least. This means a rebound in EUR and a decline in the AUD; whilst indices are higher, with the DAX outperforming. However, in the absence of a game-changing fundamental driver, this recovery may be short-lived.

It is another relatively quiet day for the economic calendar. The Eurozone and Japan both tie up a few loose ends with their final readings of Q4 2020 growth. The US trade balance may be more impactful but traders are still looking more towards the political and economic impact of the Ukrainian war to drive markets.

Today's news

Sentiment rebounds, for now: Despite Wall Street falling sharply into the close, European markets have started the day in a relatively upbeat fashion. The question is just how long this lasts before the next wave of selling pressure.

Treasury yields are rebounding: The US 10 year yield has rebounded +18 basis points from yesterday’s low. The concern will be if this bounce accelerates (which means harder selling of bonds), which would increase volatility across major markets. 

Humanitarian corridors: Talks surrounding the setting up of humanitarian corridors for civilians to escape conflict zones continue. 

Zelenskiy wants direct talks with Putin: No real ground has been given in the talks so far. Ukraine wants to talk to the person who makes the decisions on the Russian invasion.

Ramping up other oil supplies (away from Russia): The US is in discussions with Venezuela to increase oil supplies. Also, the force majeure at the Sharara oil field in Libya has been lifted. [Potentially oil negative] 

Commodities prices soaring: Metals prices continue to climb, with the rise in the price of nickel (used in stainless steel and batteries) the latest to hit the headlines. Nickel prices have rallied over 50% overnight on the suggestion of a short squeeze in futures.

Cryptocurrency prices finding support: Bitcoin has rebounded to $39,000 this morning. However, it needs to be back above $40,000 to suggest an improving technical outlook again.

Economic Data:

  • Eurozone GDP (final Q4) at 1000GMT Consensus is looking for it to be unrevised at 0.3% QoQ.  
  • US Trade Balance at 1330GMT The deficit is expected to increase to -$87.1bn in January (from -$80.7bn in December).  
  • Japan GDP (final Q4) at 2350GMT – Consensus is looking for it to be unrevised at 1.4% QoQ.  

Major markets outlook

Broad outlook: Sentiment has rebounded early today. Other similar moves have tended to be short-lived and sold into as the US session takes over. 

Forex: In a turnaround on recent performance, EUR is the best performer today, with AUD the main underperformer, along with NZD. USD is also performing well.

  • EUR/USD has found some support in the past 24 hours and picked up from 1.0805. Reaction to initial resistance at 1.0940 will be a gauge as this needs to be breached for a near term base pattern. Keeping in mind recent trends and the lack of catalyst behind this move, we still favour selling into strength. A break below 1.0805 is still likely, with the next real support not until 1.0725/1.0765. 
  • GBP/USD has picked up slightly this morning from 1.3080. However, the decisive close below 1.3160 has opened the way towards 1.2675/1.2850. We look to use a technical rally as a chance to sell. Initial resistance is now 1.3135. 
  • AUD/USD has reversed sharply in the past 24 hours. Pulling back from 0.7440 the market is now posting lower highs (initial resistance at 0.7348) and is turning corrective. A break below 0.7237 would open a deeper correction into the 0.7150 area.


Commodities: Precious metals are again strong but are off earlier spike highs. Oil remains supported and is pushing higher again.

  • Gold has again pushed above $2000 this morning and is on course towards the all-time high again which saw $2075 back in August 2020. Momentum being extremely overbought is still the main caveat but the price is not stopping for now as intraday weakness is a chance to buy. Initial support is growing in the band $1960/$1974.
  • Silver has again found buyers into intraday weakness and has pushed on once more this morning. A test of $26.50, the next basis of resistance, is likely. There is a good support building now between $25.30/$25.60.
  • Brent Crude oil remains volatile, with a sharp intraday unwind following the spike that hit $140 yesterday. However, there is a basis of support at $122.10/$122.20 with a filled gap. A move back above $133.00 resistance re-opens the $140 spike high.

Indices: Indices are trying to claw back some losses this morning, but for how long before the next wave of selling pressure? 

  • S&P 500 futures fell sharply yesterday but have rebounded from 4138 (above the 4101 key low). However, technically this move looks to be a bear market rally that is likely to find willing sellers once more. Resistance is old overhear supply between 4227/4250 which needs to be overcome for recovery to develop more seriously.
  • DAX having failed to break for a new low, the market has rebounded from above 12,436 this morning and is trying to put together a recovery. Closing above 13,155 would be a positive sign but there is a huge amount to do for a recovery to be sustainable. We remain highly cautious.  
  • FTSE 100 has been far more considered in a technical rally, but holding on to the recent low at 6755 is an important first step for recovery. Moving above 7029 (yesterday’s rebound high) would help. There is higher low support at 6839 initially.

Support and Resistance levels