Commodity prices are expected to be buoyed by sustained conflict between Russia and Ukraine even as the U.S. pledges an additional $400 million in military aid

Joe Biden has visited Ukraine’s capital, Kyiv, in a trip that has been months in the planning and shrouded in secrecy until the last minute – signaling that the western world is standing alongside Ukraine in this ongoing war. The U.S. president announced $460 million in military aid to Ukraine on the trip; an intensified battle between the 2 countries may potentially boost commodity prices including oil and gold. Meanwhile, the Reserve Bank of Australia (RBA) is considering 2 options for the size of its 1st rate hike in 2023 with the RBA meeting minutes showing. Australia’s central bank initially opted for a half-a-point increment to deal with the sticky inflation but eventually went for a 25 bps hike as concern over the upside risk of the aggressive tightening policy; the decision sustained the Aussie dollar to trade flat against the U.S. dollar. In addition, Russian oil flow to China hit a record high since the Ukraine invasion as the world’s largest crude importer stopped its Covid zero policy. Russia offers discounted prices to its Asian customer to nullify the Western sanction on Russian oil; oil prices may stay at ease at the moment with Russian discounted oil prices.

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Look Out For

Current rate hike bets on 22nd March Fed interest rate decision: 

25 bps (81.9%) VS 50 bps (18.1%) 

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Market Overview

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Economic Calendar

Market Movements

DXY

The Dollar Index was flat yesterday, seesawing within a range over the past week as the US equity and bond markets were closed for a US holiday. Nonetheless, investors continue to weigh on the prospect that central banks will have to tighten their monetary policy setting more than expected to combat inflation, following the new economic data pointing to robust economic conditions. Meanwhile, US President Joe Biden visited the Ukrainian capital of Kyiv, meeting with Ukrainian President Volodymyr Zelenskiy and declaring “unwavering support” for Ukraine’s democracy, sovereignty, and territorial integrity. After the visit, the US officially announced another $460 million in new military aid to Ukraine. Indeed, Biden also claimed that the US plans to announce additional sanctions on Russia later this week.

The Dollar Index is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 51, suggesting the index might trade lower as the RSI retreated sharply from the overbought territory.

Resistance level: 104.60, 105.55

Support level: 103.85, 102.85

XAU/USD

Gold prices have found some manner of a rally after being battered by tightening monetary policy, as the rising geopolitical tensions in the world have stoked a shift in sentiment toward the safe-haven commodities. The meeting between the United States and China’s top diplomats increased the friction in bilateral ties that will persist and hinder US-China relations. In addition, North Korea reportedly fired three ballistic missiles on Monday, while leader Kim Jong Un’s sister warned that more to come unless the United States halted its military drills with South Korea.

Gold prices are trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 50, suggesting the commodity might extend its gains as the RSI rebounded sharply from the overbought territory.     

Resistance level: 1860.00, 1905.00

Support level: 1820.00, 1766.35

EUR/USD 

The pair stayed almost flat last night, including the dollar index when the U.S. had their holiday on Monday. The recent upbeat U.S. economic data led to a high speculation that the Fed may turn Hawkish to tame the sticky inflation which strengthened the dollar since early this month. On the other hand, the ECB has also given Hawkish comments where the central bank is expected to raise an additional 50 bps in March and potentially another 50 bps in April. Investors may gauge the price movement by referring to the U.S. FOMC meeting minutes which is set to release on Wednesday (22nd Feb) and also Eurozone CPI the following day. 

On the technical front, both indicators depict a neutral bearish-bias signal for the pair. The RSI could not flow above the 50-level despite its remained above the oversold zone. The MACD stays flat flowing below the zero line. 

Resistance level: 1.0760, 1.0866

Support level: 1.0583, 1.0458

BTC/USD

The BTC edged higher last night and is testing its near resistance level at $ 25085 with a relatively high trading volume, indicating the investors’ confidence is reinstalled in the crypto market. Crypto investors seem to ignore the potential huge rate hike from Fed and the strong dollar but push BTC to trade higher on the U.S. holiday. On the other hand, Hong Kong is close to setting up its international crypto hub. This potentially allows Hong Kong retail investors, perhaps including Chinese investors to access previously banned crypto trading. Capital flow from the largest economies in Asia to the crypto market may be a substantial catalyst for BTC to trade higher. 

The RSI is currently hovering near the overbought zone and potentially breaking above the zone, suggesting a strong buying power. The MACD eased from flowing downward from the above suggest that the bullish momentum is still intact in BTC. 

Resistance level: 25085, 26250

Support level: 23713, 22816

Hang Seng Index

The Hang Seng Index is trading lower in the early trade today as the prospect of the U.S. central bank having to stay on a hawkish path weighed on sentiment, with investors looking to the minutes of the latest Federal Reserve meeting for further monetary policy clues. In addition, the spy balloon incident also deteriorated the relationship between U.S. and China, increasing investors’ worries and dragging down the appeal of the China market. Furthermore, the U.S. markets are closed on Monday for Presidents Day, prompting the trading volume of the Asian market to be lighter than usual. It gives traders some rare breathing space to reflect on the rise in U.S. market-based rates and yields. 

The overall trend seems optimistic in the longer term. MACD is indicating a diminishing bullish momentum in the near term. At the same time, RSI is trading at 42, which indicates a diminishing bullish momentum ahead. Investors can keep an eye on the upcoming HK GDP data for further trading signals. 

Resistance level: 21260, 22519

Support level: 20015, 18838

GBP/USD 

The pound is trading flat against the US dollar on Monday. The overall market sentiment remains mixed. Moreover, a strong US economy and the ECB began their interest rate hiking cycle later, leaving the BoE in a more cautious position. Some UK economic data has muted additional rate hikes post-March, and the money market now seems to favour a pause for the May meeting. On the other hand, investors can keep an eye on the upcoming UK PMI data for further trading signals. 

In the short term, the pair is still trading from 1.1936 to 1.2130 as market participants await more economic data. However, MACD suggests a neutral-bearish momentum. While RSI is at 47, indicating a neutral-bearish momentum ahead. 

Resistance level: 1.2130, 1.2431

Support level: 1.1936, 1.1649

AUDUSD

The Australian dollar remained in positive territory following the release of the Reserve Bank of Australia’s meeting minutes. According to the minutes, the Reserve Bank of Australia had considered raising interest rates by 50 basis points during its February meeting amid overheating inflation. However, the bank ultimately decided on a 25-basis point hike, bringing rates to 3.35%. Despite the rate increase, the Reserve Bank Board remains cautious, noting significant uncertainty in the near-term economic outlook. They agreed that further rate hikes would be necessary in the coming months to curb inflation, which reached a 30-year high of 7.80% in the December quarter, according to the latest data.

AUDUSD is trading higher while currently testing the resistance level. MACD has illustrated bullish momentum, while RSI is at 51, suggesting the pair might extend its gains after breakout. 

Resistance level: 0.6905, 0.7015

Support level: 0.6815, 0.6720

CL OIL

Oil prices surged Monday as market sentiment shifted to the supply and demand fundamentals. Positive prospects on the Chinese oil demand continue to insinuate bullish momentum on this black commodity. Analysts anticipate the Chinese oil demand will hit a record high in 2023 amid rising mobilities after the Covid-19 restrictions were eased. Meanwhile, recent data indicate that China and India have become major buyers of Russian oil. In January, India, the world’s third-largest oil importer, crude imports rose to a six-month high. On the supply front, Russia reduced its oil production by 500,000 barrels per day (bpd) in March after implementing sanctions from the West. In conclusion, concerns are heightened about the tight global supply due to the production cut from Russia and the implementation of oil sanctions from the West countries.

Oil prices are trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 57, suggesting the commodity might extend its gains after breakout as the RSI stays above the midline.

Resistance level: 77.35, 78.50

Support level: 76.15, 74.65