WTI climbed back above $100 per barrel as Russia cast doubt on the progress of the peace talks

18 March 2022, 02:28

Market Focus

US stocks rallied for a third consecutive day as the market digested further news regarding Russia and Ukraine, while expressing satisfaction with the outcome of the FOMC meeting. The Dow Jones Industrial Average edged 1.23% higher, the S&P500 popped 1.23% and the Nasdaq Composite climbed 1.33% on Thursday. Notably, the market seems to have gotten used to the uncertainty in the Russia-Ukraine situation. Stocks climbed even after Russia commented that the news of progress on the peace talks was false.

Nickel fell 8%, hitting the limit down on London Metal Exchange. Notably, nickel’s price more than doubled within hours on 18 March. The LME has attempted to resume trading on nickel after the rare trading halt. At the same time, the LME applied a trading limit of 5% but ended up widening it to 8% on Thursday as a technical error happened, allowing a small number of trades to go through below the limit.

The UK market outperformed its European counterparts with the FTSE 100 edging higher, up 1.3% on Thursday. The Bank Of England has announced that it will raise its policy rates by another 25 basis points, from 0.50% to 0.75%. The rate hike is the third rise since the BOE started combatting its high inflation environment.

Main Pairs Movement

The US dollar dropped to a 10-day low after Russia made bond payments. Before that, the market was worried about a technical default for Russia off the table. At the same time, the US dollar was down as the UK bonds rallied from BOE’s additional 25-basis-point increase on its policy rates.

Gold price turned upside despite the hawkish stance from the Fed and the BOE. Gold finished with $1,942 on Thursday. At this point, the market seems to be putting more weight on the Russia-Ukraine war rather than the tightening cycle.

WTI climbed back above $100 per barrel as Russia cast doubt on the progress of the peace talks. WTI was up more than 8%. The war in Ukraine has seriously disrupted the global oil flow; in the meantime, the market predicted that OPEC+ might decline to increase output in April.

Technical Analysis

GBPUSD (4-Hour Chart)

Cable traded higher after the FOMC announced a 25 basis point increase in the benchmark interest rate. Strong selling pressure surrounded the Greenback after Fed Chairman Jerome Powell indicated six more interest rate increases and the bank’s intention to begin decreasing its balance sheet as soon as the next FOMC meeting. Pound bulls could not take full control, however, as the BoE turned dovish with Governor Bailey arguing further interest rate increases could pose a threat to economic growth.

On the technical side, Cable failed to advance past our previously estimated resistance level at around the 1.3185 price region, but the pair still sees upward momentum as the Greenback continues to be sold. RSI for the pair was last seen at 57.9. On the four hour chart, Cable is trading above its 50 and 100-day SMAs but below its 200-day SMA.

Resistance: 1.3185

Support: 1.2998, 1.2876

EURUSD (4-Hour Chart)

The euro surged after the FOMC announced interest rate hikes and caused a broad-based selloff of the dollar. European Union inflation data came in higher than expectations, but this did not discourage market participants from buying the lowly-valued euro. Better than expected U.S. employment data could not provide support for the Greenback. However, market participants should note that ECB’s president Christine Lagarde resonated with Chairman Jerome Powell’s view that the recent war between Ukraine and Russia could bring on a new wave of unforeseen inflation.

On the technical side, EURUSD has completely broken our previously estimated resistance level of 1.1003 and is attempting to challenge 1.1127. RSI for the pair is trending towards overbought territory and is last seen at 69.9. On the four hour chart, EURUSD currently trades above its 50, 100, and 200-day SMAs.

Resistance: 1.1127

Support: 1.0893, 1.0845

XAUUSD (4-Hour Chart)

Gold marched higher as the Federal Reserve announced six more interest rate hikes ahead for the year. With a positive correlation to interest rates and no concrete resolution coming out of the recent peace talks between Ukraine and Russia, Gold climbed back to above $1940 per ounce and the upward momentum seems unfinished. Furthermore, with the Dollar continuing to be sold, Gold prices seem to be on a steady uptrend in the short term.

On the technical side, XAUUSD found support around the $1918 price region and has trended upward since the FOMC announcement. RSI for the pair sits at a neutral 50.4 as of writing. On the four-hour chart, XAUUSD is currently trading above its 50, 100, and 200-day SMAs.

Resistance: 1961

Support: 1918