Russia’s
invasion of Ukraine did not thankfully happen on February 16 as claimed by the White
House Administration. It may seem that investors may now give off a sigh of
relief as they may expect stock indexes to return to the upside. But now, at
the end of the week, the picture is quite different. U.S. stock indexes are
still below the 200-days moving average, demonstrating market vulnerability.
The White
House has given a new date when Russia can be expected to invade Ukraine, and
this time the date is set for February 20th. However, markets were
more scared of the mortar attacks in Eastern Ukraine from the rebellion Donetsk
and Lugansk regions backed by Russia. These kinds of attacks may, at some point,
become a trigger for the Russian invasion or, at least, a new round of fierce
clashes in this region. U.S. stock indexes lost 2.0% on this news. But, the strangest
thing was that indexes never rebounded after the United States and Russia
suddenly agreed on a new round of negotiations at the end of next week to
“solve the conflict in a diplomatic manner”. Such intensions could be a clear
sign of de-escalation from the Russian side to ease geopolitical tensions.
This may
mean that investors do not see any decent opportunities to buy American stocks
and they neither believe that a positive
outcome will come from these negotiations. In this case they may expect tension
on the Russian-Ukrainian border to increase over the weekend and next week.
The technical
picture suggests the U.S. stock market is extremely vulnerable. Firstly, all
three major U.S. stock indexes are below their 200-days moving average. Secondly,
the S&P 500 broad market index is looking towards the downside with a risk
of plummeting to 4150-4200 points by the end of next week if the index closes
this Friday’s trading session below 4390 points. By the mid-European afternoon,
futures on the S&P 500 index were trading slightly above 4398 points, very
close to this crucial point.
The oil
market was disrupted by Iran's top negotiator Ali Bagheri Kani who tweeted that
US and Iran were nearing an agreement. "After weeks of intense
negotiations, we have come closer to an agreement than ever, but nothing has
been agreed until everything has been agreed," Kani wrote on Thursday. If
the U.S.-Iran nuclear deal is struck, that would mean an additional 1.0-1.3
million barrels of Iranian oil per day in the market. Crude prices immediately reacted
by plunging by 5.0% from $96 per barrel of the Brent crude benchmark to $91.10
per barrel. However, geopolitical tension pushed prices to $93.00-94.00 per
barrel. On Friday, Brent crude prices slid again to $91.50-92.00 per barrel.
This is the level at which we may expect prices to rebound. But, the technical
picture suggests the downward trend is more likely to continue in the
short-term despite the fact that the “$100 scenario” for Brent crude is still
intact. So, it would be dangerous to open any buy positions at this point,
while it is too early to open sell positions.
The gold
market is enjoying the geopolitical tensions and is becoming a true leader of
the week in the financial market. Gold rose by 2.0%, closing at the important
resistance level at $1910-1930 per troy ounce. Gold may continue to be at these
levels until the end of February, while a deep correction of prices is expected
this spring.
EURUSD
remains in the downward trend with the target at 1.10500-1.11500. The pair
failed to reach this week’s resistance level at 1.14100-1.14300, trading at
1.13500 by mid-day on Friday. The pair may continue to dive to the support
level of 1.13200-1.13400. If the Euro rebounds to 1.14100-1.14300, sell
positions with the target at 1.13300 would be interesting to consider.
GBPPUSD
continues on the upside track with the target at 1.37000-1.38000. The Cable
jumped above the resistance at 1.36000. Any corrections to 1.35300-1.35600
should be considered as a great opportunity to close sell positions. If this does
not happen, it is better to close sell positions anyway.