Last Friday
geopolitical issues merged with other factors that direct markets, such as
inflation and monetary policy, forming a strict and rigorous sequence of market
events. If Russia invades Ukraine from February 16 to February 20, as the White
House Administration expects,
Brent crude prices may briefly jump above $100 per barrel, U.S. consumer prices
may rise above 7.5% - which was lastly recorded in January - and extremely harsh
actions may be made by the Federal Reserve (Fed) in March-July 2022.
The logic is very
simple, and we saw it working last Friday and on Monday when news about the
rising possibility of military contact on the Russian-Ukrainian border lifted
crude prices and dropped U.S. Stock indices.
It is hard to predict
how geopolitical tension between Russia and Ukraine will evolve as both sides
are calmly waving rhetoric while also increasing military presence near the
border. Russia claimed that it is pulling back some of its troops that attended
military exercises in Southern Belarus near Ukrainian border, but other
military drills continue near the Ukraine bordering regions. U.S. White House
Administration insisted that the risk of Russia’s military invasion of Ukraine
starting February 16 through February 20 is at the maximum level.
Such a situation is
not the case when markets are sensitive to macroeconomic data or corporate
earnings reports. The data that will be released this week, such as, January
PPI indexes in the United States, retail sales and others could only really
affect the market next week after invasion risks could be tamed. Technically, the
U.S. stock market is very vulnerable after a 2% sell-off last Friday reversed
the S&P 500index to the downside with the target at 4150-4200 points by the
end of this week.
All three major stock
indices in the United States dropped below their 200-days moving averages. That
means it could be interesting to consider some sell positions with the order
price at the resistance of 4430-4450 points where S&P 500 futures are now
located.
The oil market is on a
solid path for the scenario “Brent crude prices at $100”. Last Friday after the
White House announced the predicted date of the Russian invasion of Ukraine,
Brent crude prices jumped to $96.70 but gradually scaled back to $93.50-94.50
per barrel. This could be a jump start for the $100.00 level in case the Russian-Ukrainian
conflict continues to escalate.
Gold prices are
directed by geopolitics as this asset is considered to be a geopolitical hedge.
Gold prices broke through the key resistance level at $1840 per ounce and are
on their way to $1910-1930. For the moment bullion prices are above $1850 per
ounce. Technically, they are more on the upside, at least by the end of
February. But prices may drop significantly after that.
EURUSD moved to the
downside with the targets at 1.10500-1.11500. The resistance of the week is
located at 1.13200-1.13400, where the pair is currently located. Sell positions
are not very interesting at the moment but could stir interest at
1.14100-1.14300 with the target at 1.13200-1.13400.
GBPUSD is still on the
upward trend with the targets at 1.37000-1.38000. However, traders should be
aware of a possible downside correction in the coming two to three days, and be
prepared for a possible further downslide. Any sell positions here should be
considered at the level of 1.36000-1.36200 with the first target at
1.34800-1.35200. After this target is reached it is better to reconsider
current conditions or close sell operations.