Volatility is going to be very high today as Russia starts military action across Ukraine. The Russian stock market is suspended, the Russian Central Bank has stopped short selling and goods and services travelling out of the area are going to be very disrupted. The trading day will be pushed around by market headline news and flows into safe havens show the extent of the risk-off market we find ourselves in.
Market Brief
The build-up was always pointing to this moment with neither side backing down from their positions. Ukraine declared they wished to be part of Europe and NATO, Russia declared they would not let that happen. In the early hours of this morning Russian planes, special forces and targeted shelling began the attack, under the guise of a Special Military Operation, which is somehow different from declaring war. Military conflict is messy, and this could go all sorts of horrible ways. For traders, you are best to stay out.
NATO Article No. 5 means collective defence. If one part of NATO is under attack, all members go to their aide. As of now, no NATO member has come under attack. Europe has closer ties with Ukraine so the way in for helping the Ukrainians would be via the European member states, which could then open the backdoor to NATO.
As it is the euro is falling as a neighbour comes under severe threat. The Russian stock exchange is suspended, and risk is definitely, off.
The moves in the markets were instantaneous so unless you have an algo that scrapes the social media, the chances are your position was stopped out or if you are in a trending position, you just made a lot of money. For anyone thinking about getting in, it would be advisable to wait and see what the response is from the US.
European gas prices are going higher, gold is going higher, commodities like wheat and base metals will be going through the roof. There will be little commerce travelling in or out of the region and no civilian aircraft above Russia or Ukraine while military operations continue.
Even though technical analysis is fairly redundant during this much uncertainty, it is interesting to see what events take price action to the logical conclusion. Brent hit the upper bound to the rising channel and the psychological level of $100 per barrel. We can only hope that the military action is swift, and we get some normality back soon.
Gold is now at the 1.618 extension and the $1950 trading level.
The forex heatmap has now shifted to being risk-off with the largest flows going into the Japanese yen. The bullish moves into the Kiwi after the RBNZ have nearly entirely reversed the 25bps move, but there is a chance that this is just a test of the breakout level.
At the London open the EURUSD has found support just above the 1.1200 level which is confluent with a deep retracement fib level too.
Russia is adamant that they are not attacking the Ukrainian civilian population and that they are all about de-militarising Ukraine. The sanctions from the West and Ukraine’s allies will, unfortunately, end up hurting the Russian people.
Not that we need any more market-moving news, but in terms of scheduled news releases the European session is light, but the US session has some potential market-moving data points. There are the weekly US initial jobless claims, a 7yr Note auction at 6 pm and several Fed members talking all the way to 9 pm.
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