Global markets sink as Russia finally launches invasion of Ukraine. Risk averse sentiment dominates, pushing gold and oil higher, while stocks and cryptocurrencies tumble. In the currency markets, Yen and Swiss Franc surge sharply on safe-haven flows, together with Dollar. On the other hand, Euro is under heavy selling pressure together with commodity currencies.
Technically, EUR/USD finally breaks through 1.1265 minor support, confirming rejection by 1.1482 resistance. Deeper decline should be seen through 1.1120 to resume larger down trend from 1.2348. EUR/CHF’s break of 1.0298 support also suggests resumption of down trend from 1.1149. To solidify the Euro’s bearishness, we’d like to see EUR/JPY taking out 128.23 support with some conviction.
In Asia, at the time of writing, Nikkei is down -2.05%. Hong Kong HSI is down -3.27%. China Shanghai SSE is down -1.52%. Singapore Strait Times is down -3.10%. Japan 10-year JGB yield is down -0.0043 at 0.194. Overnight, DOW dropped -1.38%. S&P 500 dropped -1.84%. NASDAQ dropped -2.57%. 10-year yield rose 0.029 to 1.977.
Bitcoin ready to break through 33k low to resume down trend
Bitcoin’s steep decline today affirms that case that corrective rebound from 33000 has completed at 45842, after failing to sustain above 55 day EMA. The development also argues that down trend from 68986 is ready to resume. Further decline is now expected as long as 39252 resistance holds.
First target will be 33000 low. Decisive break there will confirm this bearish case. It’s a bit early to say whether the downside momentum warrants a firm break of 30k handle. But, we’d tentatively put 61.8% projection of 68986 to 33000 from 45852 at 23602 as the next target. Let’s see.
Gold resumes rally, targets 1946 next
Gold’s rally resumed after brief consolidation and hits as high as 1931.07 so far. In any case, outlook will stay bullish as long as 1889.42 support holds. Next target is 100% projection of 1682.60 to 1877.05 from 1752.12 at 1946.57. Sustained break there, as well as the channel resistance, could prompt some strong upside acceleration ahead.
It should also be noted again that sustained break of 1916.30 should confirm that whole correction from 2074.84 (2020 high) has completed at 1682.60, after defending 38.2% retracement of 1046.27 to 2074.84. Further decisive break of 1946.57 would quickly shot Gold up to 161.8% projection at 2066.74, which is close to 2074.84 high.
ECB Lane hints at earlier end to asset purchases
ECB Chief Economist Philip Lane said in an interview, “if inflation rates are moving towards our target in the medium term, which is now looking more likely – instead of being well below two per cent as before the pandemic – we will adjust monetary policy”.
That’s because, “we would then, for example, no longer need to make asset purchases to stabilise inflation at our target over the medium term.”
“It was different in December, when surveys still showed the expectation that we would need to maintain asset purchases until the middle of next year, but the timeline may be shorter than what people expected then,” he added.
Lane also reiterated the “sequencing” of policy normalization. That is, “our net assets purchases will first be scaled down, then ended. Then, the key policy rates will only increase above their current levels if the conditions consistent with our medium-term inflation target are met. So before we talk about potential rate decisions, we need to end net asset purchases. And we need to prepare the market for the eventual end of these purchases.
BoJ Kuroda: No immediate plans to scale back stimulus
BoJ Governor Haruhiko Kuroda told the parliament, “unlike Western countries, we have no immediate plans to scale back our monetary stimulus.” But the central bank will continue to look at inflation expectations. “We will look not just at price indicators, but also surveys showing how the public feels about price moves,” he added.
On exchange rate, Kuroda said, “if the yen weakens further, that could push up import costs. But the recent rise in import costs is driven mostly by an increase in dollar-denominated raw material prices, rather than a weak yen.”
“It’s desirable for currency rates to move stably reflecting economic fundamentals. I think recent (yen) moves are in line with this trend,” Kuroda added.
US jobless claims, new home sales and Q4 GDP will be the main features today.
EUR/CHF Daily Outlook
Daily Pivots: (S1) 1.0351; (P) 1.0405; (R1) 1.0435; More….
EUR/CHF’s fall from 1.0610 resumes after brief recovery and hits as low as 1.0288 so far. The breach of 1.0298 low argues that larger down trend from 1.1149 is resuming too. Intraday bias is back on the downside. Sustained trading below 1.0298 will target 61.8% projection of 1.0936 to 1.0298 from 1.0610 at 1.0216. For now, risk will stay on the downside as long as 1.0459 resistance holds, in case of recovery.
In the bigger picture, long term down trend from 1.2004 (2018 high) is still in progress. Next target is 61.8% projection of 1.2004 to 1.0505 to 1.1149 at 1.0223. Sustained break there will target 100% projection at 0.9650. In any case, break of 1.0610 resistance is needed to be the first sign of bottoming. Otherwise, outlook will remain bearish.
Economic Indicators Update
Private Capital Expenditure Q4
Initial Jobless Claims (Feb 18)
GDP Annualized Q4 P
GDP Price Index Q4 P
New Home Sales M/M Jan
Natural Gas Storage
Crude Oil Inventories