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Markets rebound while Russia still part of SWIFT

Russia has the upper hand considering it has advanced on the Ukrainian capital. Reports are coming in that the mission is to remove President Zelensky and force the Ukrainians to drop their ideas of joining NATO. Europe and the rest of the world are preparing further sanctions on Russia to punish them for going the aggressive route, but the markets have rebounded due to the energy and SWIFT financial system being left out of the measures against Russia.

Market Brief

As we enter another day of Russian aggression in Ukraine, markets remain extremely volatile. Mikhail Podolyak, adviser to Ukrainian President Volodymyr Zelensky, this morning has said that Kiev is willing to discuss the country's potential neutrality with Russia but will need assurances about security. This is coming at a time when the Russian military is less than 10km from the city permittee.

In an interview today Podolyak said, "Ukraine has always left room for negotiations. Including today when Russia invaded. This war must end. These hostilities must end,". "We heard from Moscow what they want to say. If they want to talk about status neutrality, we have no fear of such a discussion. The only question is who and how will be able to guarantee the security of Ukraine and the implementation of the agreements by the guarantors," he added.

To resolve the current crisis, Russia is prepared to negotiate with Ukraine, noting Kiev is expected to agree to "its neutral status and refusal to host weapons". Russian President Vladimir Putin called on Ukraine to give up its ambitions of joining NATO before launching the military strike.

The European countries are talking a good game of being there for Ukraine but refuse to go to war with Russia. They have lit up their parliamentary buildings with the distinctive yellow and blue of the Ukrainian flag. The hardest line they could take is to remove Russia from international trade by cutting them off from the SWIFT system. To facilitate international trade, banks use SWIFT (the Society for Worldwide Interbank Financial Telecommunication) to make rapid and secure cross-border payments. International trade financing relies heavily on SWIFT, and the world heavily relies on doing trade with Russia.

The moves into the yen have moved back and we saw a massive rebound in the USDJPY yesterday. Taking the sell stops yesterday from below the range and then swiftly reversing indicates to me that there were buyers waiting and they will add to their position when price comes back into the range.

The ActivTrader sentiment indicator also shows that 74% of traders on the platform are now short the USDJPY and I fully expect these traders to get squeezed out of their position.

French inflation has risen to 3.6% in February and German GDP was down 0.4% in Q4 2021. The longer this conflict in Ukraine goes on disrupting trade etc. the worse these figures will get for both countries and Europe, though the German GDP was not as low as expected.

I am interested to see if the sweep of the lows that occurred yesterday will result in a move back to the 1.1300 or whether EURUSD is really going to start moving a lot lower now.

Most traders on the ActivTrader platform are long the euro and if the previous few months of trading are to go by, these traders may not get stopped out of their position just yet.

Gold and oil both rallied on the invasion but have since started to retrace. For me this is pure profit taking by speculators who don’t want to get caught on the wrong side of a trade over the weekend. The gold chart shows the On Balance Volume is still rising, so there are a lot of market participants still active at these levels. The bids haven’t been pulled yet so we could be in for a slow decline rather than a collapse.

The Volatility Index (VIX) is still at elevated levels, so I am expecting the ranges to keep being expanded and for resting orders to get tested. This means that if your stop is within a trading range it is likely to get taken. Waiting for a move and then for price to come back to your preferred level is still a better way of trading rather than chasing every red or green candle.

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