Analytics

The XAUUSD pair gave up last week’s gains, struggling to regain strong bullish momentum that pushed the prices above $2,000 last month for the first time since August 2020. As investor sentiment has improved since then, gold’s safe-haven appeal was dented, albeit the metal refrains from more aggressive downside correction as well.

Geopolitics caps losses

In a wider picture, however, the outlook for gold prices remains upbeat as geopolitical risks persist. The latest round of Russia-Ukraine talks in Turkey earlier in the week failed to bring sustained bullishness to the global financial markets. Furthermore, investor skepticism is back now as there is no actual progress towards a potential peace agreement.

In this context, the yellow metal will continue to hold within a broader uptrend as long as uncertainty persists. It looks like the Russian military operation in Ukraine will continue in the coming days and weeks, so one should not expect high-yielding assets to stage a sustained and steady ascent at this stage, suggesting investors will continue to buy safe-haven gold, especially as global inflations adds to a more cautious tone in the financial markets.

In the immediate term, the XAUUSD pair needs to regain the 20-DMA, today at $1,950. Otherwise, the downside pressure could intensify as the greenback has bounced off local lows to retarget the 99.00 figure after the recent sell-off amid profit-taking. The bullion could see positive weekly close if the prices manage to overcome the $1,960 area. However, gold is unlikely to overcome this barrier anytime soon.

The Russia-Ukraine concerns have abated somehow but investors stay cautious as the negotiations between the two countries continue. On Friday, risk tones are seen fluctuating in European trade, albeit US stock index futures point higher, suggesting the recent ascent could continue as the weekend looms. In this context, Ukraine-related bearish risks would keep the safe-haven greenback afloat in the coming weeks.

Elsewhere, front-end yield differentials point to further downside for the EURUSD pair. The greenback remains resilient across the market as Fed officials continue to signal a more hawkish approach towards rate hikes this year in an effort to bring down unacceptably high inflation. Of note, Mester said earlier in the week she wants the federal funds rate to increase to about 2.5% by the end of the year.

Scope for a move to 1.0900

The current levels could be attractive for traders to open long dollar positions against the common currency, especially as European energy markets are going through turbulent times, signaling the need to tackle high energy prices. Earlier this week, European gas prices jumped up to 30% after Russian President Vladimir Putin said “unfriendly” countries must pay for gas in rubles.

Technically, the pair could threaten this week’s lows around 1.0960 in the near term if the euro fails to regain the mentioned moving average on a daily and weekly closing basis. Should this support zone give up, the 1.0900 figure will come back into the market focus.

Meanwhile, the EURJPY cross refreshed more than four-year highs around 134.70 before correcting lower as the oversold Japanese yen bounced across the market amid the latest comments from the Japanese officials earlier. The Bank of Japan Governor Kuroda said the central bank is watching FX moves carefully, while the country’s finance minister Suzuki pointed to importance of currency stability. Thee cross dipped below 134.00, refraining from a deeper correction despite the persisting overbought conditions.

The US dollar failed to overcome the resistance at 0.655 and after that gradually began to lose ground against the New Zealand currency. For a month and a half, the kiwi strengthened from 0.652 to 0.69 and will continue to strengthen, judging by the technical picture. The trend of the movement is clearly positive, the kiwi left behind the 200-day moving average. Support will be at 0.68, the nearest resistance is 0.7, after which a rally to 0.72 is possible and a small stop for consolidation.

At the same time, it hit the 50-day moving average and successfully bounced up from it, returning to the next derivative channel. To reduce oil prices, one of two conditions must be met - a reduction in tension in Ukraine or a deal with Iran, which will give the market about 2 million barrels per day of additional volume. So far, both scenarios seem unlikely, so at least until the end of March, oil may continue its growth, returning to $120 per barrel.

Now the Australian currency is at the top of the downward channel, which started in March 2021, and the exit from it can give impetus to growth from the current 0.73 to 0.80 in a fairly short period of time, no more than two months. Fundamentally, the Australian economy feels great even against the background of China's refusal from Australian coal - deliveries to other countries of Southeast Asia and India have begun. The global financial crisis or a major natural calamity might stifle growth, causing the Australian dollar to slip back into the 0.55 range.

Fundamentally, cryptocurrencies are challenged by global Central Bank restrictions as well as the potential prospect of identifying them as unlawful. The driver of serious growth could be the legalization of mining and investing in cryptocurrencies in Russia - after a complete ban on mining in China, farms moved to the Russian Federation and Kazakhstan, causing a lot of talk about the advisability of further work with cryptocurrencies. A particularly good sign for bitcoin will be the resignation of the head of the Central Bank of the Russian Federation, Elvira Nabiullina, who categorically disagreed with the Ministry of Finance and demanded a complete ban on cryptocurrencies in Russia. Given the tightening of the trading range, Bitcoin might rise or fall sharply in the near future. After breaking through 44,000, a sharp increase may begin, support is the mark of $37,000.

This boosted the dollar's value against almost all other currencies. At the same time, a serious energy crisis erupted in the United Kingdom in the autumn and early winter, resulting in the consolidation of the electricity supplier market and affecting economic growth forecasts. The growth of the Bank of England rate at the last two meetings somewhat smoothens the fall of the pound against the dollar, but the trend towards further strengthening of the American currency is obvious. So far, the pound is clearly holding the trend line, but its breakout will open the way to 1.20 at the current values of 1.31.

In fact, this is a repetition of the worst course since April 2003. For more than a year following the stock market crash, the Canadian dollar has been steadily rising against the US dollar, hitting 1.2. However, when Biden and his administration came to power fully, as well as the start of rising oil and food prices, the Canadian dollar began to lose strength, indicating a definite downward trend. In reality, this has been going on for the past ten months, with just slight variations. With the current price of 1.2616, we may already see a drop to 1.29-1.3 in April. Furthermore, a correction to 1.27 or a continuation of the trend to 1.32 are also plausible outcomes.

Before the start of the pandemic, it managed to overcome this mark, but the coronavirus dropped it to around 17.5 pesos in a month. Moreover, the peso failed to strengthen even in the region of 15 units, and as a result, the trend towards a gradual depreciation of the Mexican currency against the Canadian began to slowly but surely gain momentum. The technical resistance of 16.5 pesos per Canadian dollar could be broken within a couple of weeks, given the growing geopolitical risks and lower oil prices.

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The Singapore dollar has been aggressively falling against the Australian dollar from the commencement of the geopolitical global rebalance in late February, falling from 0.954 to 1 with extremely low standard volatility. Technically, the Singaporean currency's prospects are bleak: the nearest resistance at 1.015 can be cleared in a matter of weeks, but the currency pair may dwell there, hovering between 0.98 and 1.015.