Appetite in Asia was mixed. US futures gave back a part of Friday’s gains, but FTSE and European futures hint at a positive start despite escalating tensions in Ukraine after the fall of Lysychansk in the hands of Russians. So, gains are probably fragile.
Australia decided to ban Russian gold along with some other G7 nations including the US, Britain, Canada and Japan, a decision which has no influence on the course of the war.
Gold is up this morning, after having tipped a toe to $1784 on Friday. Rising geopolitical tensions and the sharp fall in the US yields are supportive of a short-term rebound. In the medium run, the death cross formation on the daily chart hints that we should see a strong resistance into the $1850 mark.
Interestingly though, crude oil is slightly down this morning, trading below the $110pb mark. We certainly saw a rebound after hitting the $105pb level last week following the OPEC decision, or more relevantly, the recession fears.
JP Morgan warns that crude prices could hit $380 per barrel, if Russia cuts output as a response to Westerns sanctions and mounting tensions. Yet, the global demand could hardly keep up, if the price of a barrel got multiplied by two or, by four from the actual levels.
Looking at the price dynamics, it’s more likely we see the barrel of crude fall below $100 than rise above $200.
Dollar gains
The US dollar index starts the week on a strong footage. The greenback reversed losses it recorded during the second half of June, and the dollar index is again very close to the 20-year peak it hit on June 15th, above 105 level.
The EURUSD is under a decent selling pressure. The pair fell to 1.0365 on Friday. We now see a triple bottom formation around the 1.0350/60 region, which could point at a possible rebound above the 1.05 level. But breaking the 1.0350 support will likely send the pair surfing lower on stops, and get the euro bears to target parity, again.
A further fall in the EURUSD would be justified by the expectation that the European Central Bank (ECB) won’t be able to catch up with the speed of tightening of other central banks, as the Europeans must make sure that raising the rates wouldn’t trigger a renewed debt crisis in the middle of a continent ravaged by pandemic, war and a serious energy crisis.
Elsewhere, the Reserve Bank of Australia (RBA) is expected to raise the rates by 50bp at its meeting tomorrow. But the AUDUSD remains under a decent selling pressure below the 70 cents mark, and the sharp fall in iron ore prices, due to the recession fears, doesn’t play in favour of a stronger Aussie these days.
