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Risk-off start today, as traders await FOMC minutes

The preparation for the FOMC meeting minutes whilst reacting to further sanctions against Russia is putting risk markets on the back foot. Equities started to fall yesterday from recent highs and there is a big impulsive move from March that could be backfilled should the FOMC meeting minutes spook the markets or Russia/Ukraine tensions flare up.

Market Brief

As of early this morning, Asian equity markets are mostly down after US equity index prices struggled for most of yesterday's trading day to find a clear direction. Late selling continued during the Asian session and is expected to continue through the London session as well.

The Nikkei225 has found resistance at a previous day’s low but is currently finding some dynamic support from the daily 50-period EMA. There is a big impulsive move to retrace all the way back down to 25698 before the next major support zone.

A new round of sanctions against Russia is set to be announced today by the US and Europe as the international community condemns the actions of Russian forces against Ukrainian civilians. This will have knock-on effects on the rest of the global trade as goods get redirected and displacements occur.

Caixin's services PMI fell to 42.0 in March from 50.2 in February, possibly because of the increase in Covid cases. German factory orders declined by 2.2% in February as the war in Russia has dented demand and the price of energy has also been a factor.

As there is no actual Tier-1 data this morning, the market's focus will be on this evening's release of FOMC meeting minutes. Two things will be of particular interest in today's minutes. In March, how close was the Fed to hiking by 50 basis points? In his press conference following the meeting, Fed Chair Powell assured the audience that the minutes will provide more detail on how the runoff of QE holdings built over the past few years will proceed.

During the London session, the UK PMI construction report will provide the latest sector update. The housing and construction sector again complained in February about long delivery times and cost pressures, as well as difficulty recruiting workers, and there is nothing to suggest this would have changed in March.

Today, ECB Chief Economist Lane will speak about inflationary pressures. Yesterday, bond yields around the globe rose in response to concerns about higher inflation and tightening monetary policy. Currency markets saw the US dollar rise against sterling and a generally weak euro. The monthly chart of the EURUSD shows the single currency getting close to a major trend line which if broken would be a major signal of a larger correction towards parity.

Yesterday energy markets were mixed as WTI Crude Oil futures prices fell, Brent prices also fell but remained within recent ranges, and Natural Gas futures prices rose over 5.5%. We could see the crude markets bounce today, especially after the US oil inventory data. Brent didn’t take out yesterday’s low and that essentially had dipped into support, so I am looking for a break of yesterday’s highs and possibly a break towards the $115 per barrel. A stop-loss under the lows from yesterday would be where my idea is invalidated. To support this idea not only is price action attempting to make a base but the moving averages are still stacked bullishly and a break above the 20-period EMA could release the momentum to the upside.

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