Weekly Trading Update
Weekly Trading Update 25.02.2022
Week of Feb 28
The evolution of the war in Ukraine – including the conflict itself and retaliatory sanctions - is seen as the prime risk mover this week. Non-farm payrolls and RBA, BOC meetings are also on tap.
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The week in review
Russia's invasion of Ukraine dominated the markets over the past week, and was the primary driver of risk sentiment. Some were starting to think that Russia's incursion would be limited to the areas already held by separatists, as Russia went on holiday on Wednesday. But that night, Russian forces started bombing air bases and the defences of Ukraine, while ground forces crossed the border in three major locations.
The subsequent uncertainty saw European bourses slumping on Thursday, while US indices dropped then recovered initial losses. The NASDAQ entered bear territory as the S&P 500 entered a technical correction. US GDP coming in as expected didn't help improve sentiment. WTI spiked above $100/bbl, and talk circulated over renewed inflationary pressures.
Commodity prices surged. Ukraine is a major producer of agricultural products, supplying Europe with wheat, barley, and corn. In particular, wheat hit a record high of 315.25 EUR per tonne. Natural gas prices also surged as fighting was reported near key nodes of the gas network that transits around half of the total Russian exports to Europe.
The week ahead
Ukraine-Russia
Geopolitics is likely to remain the theme for next week. Investors will try to digest the fallout of the Ukraine situation as we get a clearer picture of what's going on over the weekend. The longer-reaching impacts of the sanctions announced on Russia will likely be better understood as well. Susceptible oil and gold prices have peaked at $100/bbl and 1975/oz, remaining as resistance levels. On the flip side, support can be observed at $90/bbl and 1880/oz, respectively.
PMIs
PMI data from virtually all major countries is released this week. On Tuesday, China and the US report Manufacturing PMI and the final figures from Europe. Then, later on Thursday, its non-Manufacturing PMI, also from China and the US. Forex markets may be more inclined to move based on risk sentiment rather than data. USD/JPY remains bullish above 115, but 116 is resistance.
Commodity FX & Central banks
The RBA holds its rate decision on Tuesday, and is expected to keep policy on hold. Critical levels for AUD/USD are seen at 0.7280 and 0.71.
Canada reports Q4 GDP figures one day ahead of the BOC's interest rate decision, where analysts expect a hike of 25 basis points. The Loonie shows major support at 1.27, whereas resistance lies at 1.2880.
US jobs report
The week closes out with the monthly labor report from the US. After a better-than-expected earnings season, the consensus is that the jobs market is likely to remain strong, if not as high as last month, with a median expectation of 381K jobs created compared to 467K in January. Support and resistance are at 4100 and 4500 respectively for the SP500.
The rest
Tuesday also has President Biden's State of the Union address. Earnings season is winding down, but earnings of note include Bunzl, ABF, Persimmon, Costco, and HP.
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