What are we looking at today:

  • US/China tensions rising: The US is concerned over how China is backing Russia. The extent of its support could determine the next phase in geopolitical tensions that impact market sentiment.
  • Data trading: German ZEW Economic Sentiment (expected to fall sharply, a downside miss would be EUR negative). US PPI (higher than expected would support the USD). 


Market sentiment is wilting under the pressure of geopolitical tensions once more. The optimism of progress in peace talks between Russia and Ukraine has been hampered as Russia is still looking to achieve its full objective. This does not seem to be the space for common ground for a diplomatic resolution. Markets are now having to factor in the added risk of China becoming tied to Russia. The US are ready to forcefully dissuade China from supporting Russia. The prospect of sanctions has helped to drive a massive sell-off on Chinese equities.

On major markets, this is adding up to renewing negative sentiment coming back in. This is pulling equity markets lower into the European session. Curiously though, we are also seeing USD under near term corrective pressure. Commodities also continue to fall, with the oil price another -5% lower this morning, with Brent Crude close to $100 again.

The main events are not until later in the week, but traders will still be keeping an eye out for a few data releases today. The German ZEW is expected to fall off a cliff in March, but by how much is the question. The potential for a significant surprise is high. The US PPI (factory-gate inflation) is expected to tick up to 10%. It is also worth watching out for the New York Fed manufacturing.

Today's news

Sentiment turns sour: Selling pressure on Wall Street into the close has drifted into the European session, with European indices over -1% lower. This comes despite commodities continuing to fall back and USD also underperforming.

Treasury yields fall back: the US 10 year is around -5bps lower, perhaps with a slight haven bias today.   

Russia/Ukraine talks: will continue on Tuesday. Quite whether a serious agreement can be reached is another question.   

US concerns over China: China supporting Russia, either militarily or economically would mean “significant consequences”.

China data beats expectations: Industrial Production jumps to 7.5% YoY (3.9% exp); Retail Sales jump to 6.7% (3.0% exp)

China is increasingly impacted by COVID: case numbers are rising and this is a problem for the zero COVID policy. Lockdowns and social restrictions are also now being announced in some cities.

UK unemployment falls: The rate for January is now at 3.9% down from 4.1% in December (4.0% expected). Average Weekly Earnings including bonuses have also jumped to 4.8% (from 4.6%)

Cryptocurrency falls again: Crypto continues to trade as a risk asset, falling again today. Bitcoin is around -0.8% and just above $38,000. Key near term support comes in at $37,000.

Economic Data:

  • German ZEW Economic Sentiment at 1000GMT – March sentiment is expected to fall sharply to +10.0 (from +54.3 in February)
  • US PPI at 1330GMT – Factory gate inflation is expected to have increased by +10.0% in February (up from +9.7% in January), with core PPI increasing to 8.7% (from 8.3%).
  • NY Fed Manufacturing at 1330GMT – The survey is expected to improve to +7.2 in March (up from +3.1 in February)

Major markets outlook

Broad outlook: Sentiment has deteriorated and is impacting equity markets especially. Commodities continue to fall, with the USD faltering against major forex.

Forex: EUR continues to recover, with USD slipping and CAD the main underperformer (as oil continues to fall).

  • EUR/USD has continued to recover from 1.0900 this week and is still trading on the bid this morning. A move above 1.1000 is gathering pace, but a break above 1.1040 (Friday’s lower high) is needed for a sustainable near term technical recovery. That would re-open 1.1120 again. Support of the recent low at 1.0805 remains key. 
  • GBP/USD continues to fall and is selling into intraday strength. The psychological 1.3000 support is holding for now, but the next significant price support is not until 1.2850. There is overhead supply for a technical rally around 1.3080 with Friday’s high at 1.3125 a further barrier.
  • AUD/USD has fallen sharply in recent days. Breaking the support at 0.7245 in such a decisive way now leaves 0.7245/0.7275 as key overhead supply and resistance again. Near term, charts are more corrective but we are neutral sitting between 0.7085/0.7275.

Commodities: Precious metals have accelerated in corrective moves, whilst oil is also under mounting corrective pressure.

  • Gold has turned a consolidation drift lower in a more decisive corrective move early this week. The five-week uptrend (today at $1948) has been decisively broken. Intraday charts also show a top pattern completed on a move below $1958 which implies a move back to test the $1880/$1900 support area. Resistance is now in place $1958/$1974.

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  • Silver has fallen back decisively to complete a small head and shoulders top (on the 4-hour chart) on a move below $25.30. This implies a retreat towards the support at $23.85/$24.10. The neckline is now a basis of resistance at $25.30 with old support becoming new resistance.
  • Brent Crude oil a corrective drift accelerated lower throughout yesterday’s session and has continued lower today. The market is now close to breaking back under $100 again. The support of a three-month uptrend comes in around $98 today, with an area of support at $95.00/$97.50. There is overhead supply now between $107.30/$109.60.

Indices: Indices have lost their recovery momentum and are pulling decisively lower once more.

  • S&P 500 futures have now fallen for the past few sessions and are again lower today. A move below 4138 opens the 4101 key reaction low. It seems that selling into strength is still the strategy. Initial resistance is between 41090/4205.
  • DAX has fallen over to leave a strong resistance band between 13,800/14,100. The retreat this morning has broken a mini recovery uptrend of the past week. Eyes will be on the higher low support at 13,275as a breach would all but re-open the 12,436 low again. 
  • FTSE 100 has also fallen over to breach the recovery uptrend support. If there is a decisive break below 7051is would re-open the downside again. Resistance is increasingly important between 7170/7264.

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