We’re still trading headline news, though there is scheduled economic data coming through. The inflation in Japan rose, but the market didn’t bat an eyelid. UK CPI rose, and we are seeing an effect in the pound. The worry comes from Russian Foreign Minister Lavrov’s statement which said that “sending peacekeepers to Ukraine could lead to direct confrontation between Russia and NATO.”
Consumer prices increased by 6.2% in February compared to the same month a year earlier, the Office for National Statistics reported this morning. This marked a record high since 1992 and marked a significant increase over January's 5.5% rate. Consumer prices in February rose 0.8% monthly, while the Consumer Prices Index including owner occupiers' housing costs (CPIH) increased 5.5% year over year and 0.7% month over month. Housing and household services and transportation, particularly motor fuels and second-hand cars contributed the most to the CPIH 12-month inflation rate.
The ONS also reported that the headline rate of inflation for goods leaving the factory gate in the United Kingdom increased by 10.1% in the twelve months to February.
Rising inflation is great for producers and so far the FTSE100 appears to be holding up due to its miners and oil companies. Raising the bank rates will also help the financial sector so the FTSE again will benefit from that cohort. My base case scenario is that we sweep the weekly double top. However, my concern is that the price action broke the market structure a few weeks ago and that this current rally is a deep retracement, which potentially ends around the 7550 level. Momentum is showing an upward trend as expressed through the EMAs, so maybe there will be an overshoot to the upside hence, the sweep of the double top. But if things are going to be bullish for longer, I’d rather buy around 7264 on a rejection of the weekly highs than take a long into this balance area from the start of 2022.
The pound didn’t get to my desired level for a short as the 1.3300 big figure got in the way and traders sold there. We may get a second attempt if the high from March 21st hold as support but if they don’t I’ll wait for a breakdown, retest, and continuation trade later.
Traders watched statements from Western officials yesterday looking for hints of future sanctions against the world's second-largest oil exporter, Russia. Kazakhstan's energy ministry announced today that the storm-damaged Caspian Pipeline Consortium (CPC) is partially shut down for repairs, adding to the supply worries.
Crude oil futures had risen more than 1% in today's early trading, erasing losses from the previous session. US crude inventories unexpectedly fell last week, indicating a tight global market due to international sanctions against Russian oil. The US crude stock data for the week ending Mar. 18 showed a decline of 4.3 million barrels, following a rise of 3.8 million barrels in the previous week. This latest draw went in the opposite direction of market expectations for an increase. Analysts looking at the ramifications due to the geopolitics are now calling for most of the Russian production to be removed from the market. This could have a detrimental effect on the price of Brent with $150 per barrel at a minimum.
The forex heatmap is not giving a decent sentiment reading, so maybe the AUDCHF long or USDCHF long flows would be the way to go. Tonight, we get the Australian Flash PMI's and during the US session there are FOMC members talking, but the Swiss franc traders will be positioning themselves ahead of the SNB rate decision tomorrow.
If you fancy trading the USDCHF but would rather sidestep a possible Swiss franc moment of volatility, you could consider the EURUSD, which trades inversely most of the time. The EURUSD found resistance at the 1.11419 level which was a daily low and there are no clear daily imbalances below, which suggests to me the March lows could be the next target with a possible push towards 1.0800 next.