Crude oil and natural gas prices surged during the overnight session after the United States and the UK announced new sanctions on Russia. In a statement, Joe Biden said that the US will stop importing Russian oil and gas. Boris Johnson also reiterated the statement while the European Union announced that it will accelerate its process to phase out Russian exports in the coming years. On Monday, Russia warned that it could be forced to end supplies to Europe because of the ongoing sanctions. Therefore, analysts believe that the new normal of higher energy prices is here to stay.
American equities declined sharply for the second straight day this week as concerns about the cost of doing business escalated. Most companies will be negatively affected by the rising costs. For example, retailers will need to pay more for cargo from overseas since shipping companies are expected to boost their prices. Airlines are expected to see thin margins because of high costs and the fact that the important route through Russia has been cut. Further, financial equities are struggling as investors predict a new era in cybercrime. The only beneficiaries are companies in the oil and gas industries.
The economic calendar will not have any major events on Wednesday. Earlier, Japan published strong GDP numbers while China released strong inflation data. The Energy Information Administration will publish the latest inventories numbers although their impact on the oil market will be muted. Meanwhile, investors will focus on the nickel market which saw prices jump sharply on Monday forcing the London Metal Exchange to halt. Also, investors will watch the Russian market, which is expected to reopen after being closed for more than a week.
XBRUSD
The XBRUSD pair surged to a high of 130 after the US and UK halted purchasing Russian cargo. On the daily chart, the pair has moved above the 25-day and 50-day moving averages. It has also climbed above the key resistance level at 118, which was the highest point last week. Oscillators like the CCI and MACD have also continued their bullish trend. Therefore, there is a likelihood that the bullish momentum will continue.
EURUSD
The EURUSD pair was little changed in the overnight session. On the daily chart, the pair has been in a strong bearish trend in the past few months. It has also moved below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved below the oversold level. The MACD has also moved below the neutral level. Therefore, since it has formed a bearish flag pattern, there is a possibility that it will have a bearish breakout.
XAUUSD
The XAUUSD pair rose sharply in the overnight session as global risks escalated. It rose close to its all-time high. Also, the pair remains above the 25-day and 50-day moving averages. Oscillators like the Relative Strength Index (RSI) and the Commodity Channel Index (CCI) have moved to the overbought level. Therefore, while the bullish trend will probably continue, there is a likelihood that the pair will have a pullback in the near term.
