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  • Writer's picturen ev

Gold hovers around $1900 oz, headlines are dominated by Russia

Seasoned traders will know that the market goes from one news story to the next, focusing all their efforts on trying to position themselves for every outcome, only to have to redo all that thinking when the next big existential threat emerges. We have recently gone from the trade wars to COVID and now we’re at the dawn of WW3. Russia has dominated the headlines today and the next step is that they probably annex the two regions contested by Ukraine and Russia, in a similar manner to how Crimea was taken. I am not sure what can be done to stop them and what will happen if NATO doesn’t stop them. They supply energy to the West and that is a major concern already. The West will be economically crippled just as much as Russia if we refuse their oil and gas through sanctions.

Market Wrap

The US session has been quiet as most US traders and exchanges are on holiday, celebrating Presidents Day. Presidents Day, observed on the third Monday of February, honors two of the country's most prominent figures - George Washington and Abraham Lincoln. I doubt we're getting a new holiday for the current or previous US President. The London close is ending mixed across the forex pairs, with flows into the New Zealand dollar ahead of the RBNZ meeting this week and out of the Canadian dollar as domestic and geopolitical tensions rise. Canadian PM Trudeau said that the state of emergency is not over and there continue to be real concerns over the coming days. Some reports have stated that there has been a run on the banks over concerns that people's accounts are now frozen if they have been supporting the protests in anyways.

The price of energy keeps rising and Brent is once again trading at $93.00 as the flows come out of the US dollar. The momentum as seen in the moving averages is strong and if we can get price action to be pushed above the previous swing high, $100 per barrel is next. At which point we should know whether Iranian oil is due to come on stream or whether that deal has been scuppered. There is also optimism that a meeting between President Biden and Russian President Putin could also help get economic activity back to normal if the conflict can be avoided. Russia is currently deciding whether to formally recognize the two breakaway republics in Eastern Ukraine.

For most of the London session, being a contrarian trader in the EURNZD was a good idea.

Most traders on the ActivTrader platform are wanting to see higher prices in the EURNZD but for me, these guys are going to get squeezed out of their position.

An intraday m30 chart clearly shows a downtrend with a breakout this morning before some support was found around 1.6840. If the EURUSD were to shoot up higher, this could lift all euro boats and we see a test of some recent daily swing lows, but I think the RBNZ rate hike will see EURNZD lower into Thursday at least.

Gold rallied last week on the back of what was happening geopolitically but also because there is a push towards converting un-allocated futures into spot physical. Gold bugs believe that the yellow metal will be a great hedge against inflation, whereas the anti-authoritarian feel that the real money will become more valuable than fiat, should things globally go the way we are seeing in Canada, with the freezing of bank accounts, etc. As a store of value gold has proved itself over the last 5000 years and so we have sentiment rising and momentum building to the upside. Looking at the chart above the trend is bullish but for me, these rising channels generally break to the downside, so if we don’t soon see a push to $2k, profit taking will happen and we’ll see a deeper retracement.

What we are now waiting on is what happens when Russian President Putin formally recognises the 2 breakaway regions with Ukraine.

It has been 700+ days of living under COVID-19 restrictions. We have seen the economy get partially shut down, clapping the NHS on our doorsteps and so much uncertainty. Yet the FTSE100 has been quite resilient. Current price levels are basically where things were pre-pandemic and the lowest low in 2020 was brief and swept the stops that were placed around Brexit times.

Now that PM Johnson has called for an end of self-isolation, an end of free COVID tests and we’re just living with the disease, the FTSE100 is following along with the rest of the global indices, which unfortunately happen to be falling. The impending sanctions that will face Russia on anything deemed too far by the West with regards to Ukraine have seen investors flee the RTX. The Russian benchmark index is down -11%. The DAX is down -2% and the US averages are all down around -1%.


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