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Risk-on forex remains, but equities are mixed as sanctions-hit Russia

Market participants are once again reactive, rather than proactive. Most of the headlines coming out of the news are pertaining to what is happening in Ukraine, in the Russian Parliament, and what the world's leaders will do about it. Fundamentally things should get worse for Russia as the world gangs upon them to show we're not in favor of invading other countries. But so far Putin is showing disregard for their protestations.

Market Wrap

Russian President Putin is crossing his t’s and dotting his i’s as he tells the world that the Minsk peace agreement was dead long before Russia recognized Donbas and asks the Russian Parliament for the formal authority to place Russian soldiers on foreign soil.

With the Russian Upper House of Parliament agreeing to the request Putin can at any time he deems suitable respond to an ongoing assessment of the situation on the ground. He is not immediately maneuvering troops.

Despite the relative strength of the euro and the weakness of the yen and Swiss franc, the equity markets have been mixed. The S&P500, UK FTSE100, and Dow Jones Industrial Average are trading above their open today, whereas the Nasdaq, DAX, and Nikkei are red for the day.

In February, consumer confidence fell in the US, according to the latest report by the Conference Board released earlier today. In February, the Consumer Confidence Index dropped from 111.1 to 110.5. Meanwhile, the Present Situation Index improved from 144.5 to 145.1, and the Expectations Index decreased from 88.8 to 87.5.

The US private sector's production rose significantly in February as companies reported a notable rebound in demand following COVID-related disruptions at the beginning of the year. Slight ease in supply bottlenecks sparked an increase in output among manufacturers as well as service firms. In February, the average price charged for goods and services also rose to a survey record. The IHS Markit US Manufacturing PMI increased to 57.5 in February of 2022 from 55.5 in January, beating forecasts of 56, preliminary estimates showed.

The US dollar hasn’t yet responded to the day's data and the geopolitical situation, but that is likely down to the euro strength whilst nations decide what sanctions to impose on Russia, rather than the scheduled data today. There is a possibility that the test of the pitchforks median line was the buy the dip trade and that after this period of consolidation the greenback breaks higher.

While the US dollar is relatively weaker, the Australian dollar has been bid up today. In the video analysis this morning I was targeting a pullback for a long and that analysis has come to fruition. What Aussie dollar traders need to see now is a strong close above the previous swing highs and wicks and that may come on the back of rate hike expectations from the RBA. In tomorrow’s overnight session the RBNZ is expected to raise its official cash rate to 1%. This would leave the AUD and NZD diverging in terms of rates and a sharp correction would be expected from the RBA.


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