The first quarter (Q1) of 2022 has proved to be a historical start to the year in particular for some markets such as nickel and wheat trade. Much of the price action was initially driven by inflation concerns as global economies began to open more after Covid-19 forced lockdowns. This main price action driver has recently pivoted into geopolitical risks due to the Russia-Ukraine war and over the weekend Iran suspected to have fired missiles into northern Iraq as the 2015 Obama-era Iran nuclear deal revival has been “paused”. There was a glimmer of hope coming from the Russia-Ukraine crisis as officials on both sides indicated on Sunday there could be positive results in the coming days.
Since Russia’s invasion of Ukraine on February 24th 2022, the US Dollar (USD) has gained circa 4.46% against the Euro (EUR) reaching lows of EUR 1.0806. Since then, there has been strong resistance around the price level EUR 1.1117 with the Euro mostly trending downwards against the USD. Gold (XAUUSD) , a safe-haven asset which tends to outperform during times of crisis and heightened volatility (a measure of risk and uncertainty in the market) has performed strongly during this crisis. XAUUSD gained as much as 10.20% in the 1-Day chart time frame, reaching a high of $2070 per ounce. While most of the two (2) weeks and Five (5) days of the Russian invasion of Ukraine has seen the precious metal mostly trade in an up-trend, as of March 9th 2022 there seems to have been a shift in momentum, turning the trend toward a downward slope in the same 1-Day timeframe chart. This XAUUSD turn in the trend could possibly be reflective of the positive comments coming from both Russian and Ukraine officials of signally progress in talks.
Oil rallied, with ICE Brent Crude reaching a high of $138 per barrel and WTI $129.50 per barrel. Estimates at the beginning of the year were of the liquid commodity to possibly reach triple digit by Q3 2022 however due to the Russia-Ukraine geopolitical crisis this has happened much sooner in Q1 2022. Just as gold, the up-trend in Oil has seen a shift in direction and momentum as of March 9th 2022. WTI Crude Oil, currently down 20.13% since the $129.50 up-trend high, is trending bearish trading at $103 per barrel at the time of print. Russia is the world’s Third (3rd) largest oil exporter, producing as much as 10million barrels of oil per day. Hence a disruption in Russian energy supply would send shockwaves across global markets. The Russian-Ukraine war has certainly affected markets across continents, together the two countries account for a third (1/3) of global wheat exports which is a significant reason for the recent rally in wheat prices. Any signs of the conflict desepating will certainly be well received in markets and this will likely be reflective in price action.
Focus this week turns to the Wednesday 16 March US Federal Open Market Committee (FOMC) meeting announcement on it’s interest rate decision. The FOMC is the US Federal Reserve’s policy making body which manages the US’ money supply. US Federal Chairperson Jerome Powell will hold a press conference at which he will announce the interest rate decision of the committee. Much of markets are uncertain as to how the FOMC will factor in the Russia-Ukraine crisis as this has put tremendous additional inflationary pressure on global prices. With the US already battling record inflation at 7.9% ,markets will be closely listening as US Fed Powell announces the policy guidelines with a possible 25bps (0.25%) interest rate hike expected. However due to the infaltionary pressures induced by the Russian-Ukraine conflict, markets are anticipating a possible 50bps (0.50%). interest hike.
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