Analytics

The Norwegian krone is often regarded as the currency that most accurately reflects the movement of oil versus other foreign currencies, particularly dollars and euros. If oil prices rise, the krone strengthens, and vice versa if oil prices decrease. At the same time, geopolitics, inflation, and logistical issues are bound to have an impact.

The key phase of strengthening for the krone, like all oil-dependent currencies, was September and October. The Norwegian currency then nearly touched 9 units per Swiss franc, approaching last year's may highs. After that, despite the largest rise in oil prices since 2014, geopolitical tensions, in which Norway, as a nation through which the sea route to Russia passes, could not but play a passive role, as well as growing inflation, began to work against the krone. In the future weeks, the most likely scenario for this currency pair is movement between 9.4 and 9.8 Krones per franc.

A new earthquake struck Fukushima. The tsunami in 2011 wrecked the reactor on this island, and the possibility of another natural disaster remains very high, thus the value of the yen will be determined solely by this event in the next days and maybe weeks.

Given that the yen has been actively declining against the dollar since September 2021, and is currently approaching February 2016 lows, a further drop to the 125 yen per dollar range at the present exchange rate of 118 yen is highly likely. Given the Fed's tightening policies, this appears to be the first big hurdle on the route to 135 yen, which is the lowest level since 2002.

It includes not only a halt in the sale and maintenance of automobiles in Russia, but also inflationary costs in the form of higher energy prices for manufacturing facilities, as well as delays in the supply of microchips and processors, as Russia and Ukraine were important transportation hubs.

After reaching a high of 100 euros per share, which hadn't happened to BMW since December 2015, the share price has dropped below 70 euros, resulting in a 22 percent correction. The external background for the German car sector is presently adverse; theoretically, the nearest level at which the share may acquire a footing is 80-85 euros, but severe opposition at approximately 80 euros is now preventing this. On the other side, the daily chart's head-and-shoulders pattern has completely worked out, thus breaking over this barrier appears likely in the coming weeks.

The primary driver of this increase is the global economic crisis, and gold has historically been the first precious metal in which investors put their money to protect their investments during market downturns. The recession that has begun in the United States, along with rising inflation in Europe due to high energy prices, is exacerbated by a possible humanitarian crisis - since the beginning of the year alone, food prices in the world have increased by 20%, and wheat futures have already broken through $1,300. The factors of a serious conflict in Ukraine, complications in China and the Fukushima earthquake make gold a great insurance option. Gold resistance levels are 1930 and 1950, after which a rapid increase to 2020 and $2100 is possible.

The USD index has settled under the 98.50 zone as the recent rally faded. Overnight, the greenback received a solid boost from Fed’s Powell who hinted at more aggressive tightening down the road to combat inflation.

However, the overall market reaction to a hawkish message was short-lived, with US stock index futures erasing yesterday’s losses while European equities add to previous gains. However, risk aversion could reemerge at any point as the geopolitical uncertainty surrounding Ukraine remains elevated.

Of note, Fitch Ratings has cut its world GDP growth forecast for 2022 by 0.7% to 3.5%, reflecting the drag from higher energy prices and a faster pace of US interest rate hikes. Also, in its gloomy economic outlook, the agency cited the Russia-Ukraine conflict and related uncertainties.

USD index keeps targeting 100.00

For the greenback, developments on this front mean that the underlying demand for the safe-haven US currency remains intact while the bearish potential is limited, especially as the Federal Reserve has started signaling more aggressive rate hikes this year.

As such, the USD index keeps targeting the 100.00 psychological level last seen in May 2020, albeit staying now below the 99.40 peaks seen earlier this month. The longer-term outlook for the buck is seen upbeat while above the 94.60 zone that capped the sell-off in January. In the near term, the index needs to hold above 98.00 in order to avoid a deeper downside correction.

Later this week, the US retail sales report will come into the market focus. The release could give an extra boost to the dollar if the figures surprise to the upside, thus adding to Fed rate hike expectations. The upcoming statements from Fed officials will be closely monitored by traders as well.

As such, the futures are set for a second straight weekly loss despite regaining $100 a barrel, with volatility staying elevated as geopolitical tensions surrounding Ukraine continue to persist. The recent bounce from local lows was due to warnings from the IEA. The agency said that three million barrels per day of Russian oil output is at risk as buyers shun the country’s exports. In turn, large-scale disruptions to Russian oil production could create a global oil supply shock, the IEA warned.

Outlook bullish despite conflicting signals

Today, citing supply fears related to the Russia-Ukraine crisis, the agency urged governments to urgently implement measures to cut global oil consumption within months. The statement capped gains in the market as the prospect of lower demand is negative for crude oil prices.

Despite the recent hesitations in the oil market, Brent will stay elevated both in the short- and medium term due to long-lasting consequences from the ongoing Russia-Ukraine crisis. Also, the market will be further supported by a decline in global stockpiles. Meanwhile, traders seem to shrug off the US-Iran nuclear talks as negotiations stall.

On the negative side, a surge in coronavirus cases in China threatens demand as the country shifts to lockdowns that could put 500,000 bpd of oil consumption at risk. Of note, China is now facing its biggest surge in cases since the first major outbreak in Wuhan in early 2020, triggering strict restrictions in the world’s second largest economy.

The overall outlook for XAUUSD has deteriorated further this week, and it looks like the yellow metal could extend the bearish correction in the near term, especially as the daily RSI keeps pointing lower in the neutral territory. Now, as gold prices are back below the mentioned moving average, the market focus shifts to the $1,900 psychological level for the first time since late February.

What’s behind the falling gold price

The safe-haven metal slides on rising hopes for progress in peace talks between Ukraine and Russia as the two counties continue their discussions this week. Against this backdrop, risk appetite has improved somewhat in the global financial markets, albeit the overall tone among investors remains cautious as Russia’s military operation in Ukraine continues. As such, speculative traders are now taking profit after the recent rally in gold prices.

The non-yielding metal is also pressured by rising US 10-year Treasury yields ahead of the Federal Reserve rate hike this week. In this context, Powell’s comments on the outlook of the economy and further rate hike trajectory will set further tone for the bullion later this week.

Despite the retreat, one shouldn’t call the peak in gold prices just yet as the situation surrounding Ukraine remains uncertain. Furthermore, risk sentiment could be dented by China where new local Covid-19 cases continue to rise, as the country faces its biggest outbreak since the early days of the pandemic. Technically, the bullish trend in gold prices remains intact as well.

Currencies see some intraday volatility due to conflicting signals from the geopolitical front. In particular, risk trades bounced ahead of the North American session amid the reports that commenting on the latest talks with Ukraine, Russian President Vladimir Putin said there are certain positive shifts in negotiations. At that, he refrained from sharing any additional details on the matter. On the other hand, Ukrainian President Volodymyr Zelenskyy reiterated that more sanctions against Russia are needed from Ukraine's partners.

Japanese yen keeps bleeding

The Japanese yen is the weakest rival of the American currency today. Earlier in the day, USDJPY briefly jumped above the 117.00 figure for the first time since January 2017. The pair has retreated marginally since then while still holding just below the mentioned level, which implies that the greenback may be ready for further gains, at least in the near term.

The pair has been trending higher for the fifth session in a row on Friday, accelerating the ascent due to a combination of factors. First, early signs of some stability in the global financial markets dented the safe-haven appeal of the Japanese currency while the underlying bullish sentiment surrounding the USD stays intact. Second, Thursday's strong US consumer inflation figures (the CPI accelerated to a new 40-year high last month) reinforced bets for a start of hiking interest rates by the Federal reserve next week. Meanwhile, the Bank of Japan said earlier today that Japan's economic and price conditions don't allow withdrawal of stimulus.

At this stage, the technical picture suggests the USDJPY pair could reclaim the 117.00 psychological figure. However, as the focus remains on the incoming geopolitical headlines, renewed concerns about the risk of a further escalation of tensions surrounding Ukraine could cap the bullish tone and prevent the buck from targeting the 118.00 mark.

The most popular digital currency starter the week on negative footing along with equities as risk sentiment remained depressed amid Russia’s intensifying conflict in Ukraine. Traditional markets were also pressured by the reports that the United States is willing to move ahead with a ban on Russian oil imports. Even higher energy prices could lead to slower economic growth at a time when the Federal Reserve tightens its policy along with some other central banks.

No signs of progress

As digital assets have been risk-sensitive lately, the overall investor sentiment affects the tone in the cryptocurrency market. In this context, downside risks continue to persist for the time being as there are no any signs of progress towards resolving the Russia-Ukraine conflict.

As such, European equities bounced along with risk trades as the EU said to mull a large joint-bond sale to fund energy and defense. US stock index futures pared early losses as well, pushing BTC to the mentioned intraday highs.

However, it looks like the BTCUSD pair would lack the upside momentum to get back above the $40,000 figure in the short term as traders stay cautions amid the geopolitical developments. In other words, the coin could face renewed selling pressure after a short-lived bounce, with the $37,000 immediate support staying in the market focus for the time being.

In a wider picture, the largest cryptocurrency keeps trading within a tightening range, suggesting the market is getting less volatile while also staying within a bearish trend that has slowed down this year. On the weekly charts, the technical picture is getting more neutral as the prices have settled between the 20- and 100-SMAs.

On this front, risk aversion intensified on Friday after reports that Russia began shelling the Zaporizhzhia power plant in Ukraine. In his latest remarks, the Ukrainian presidential adviser highlighted that Ukraine will not announce the date and time of new talks with Russia in advance. Amid a huge exodus in Russian assets, the Moscow Exchange remains closed while the rouble has settled marginally below record lows.

Bulls remain in control

It looks like the safe-haven dollar demand will continue to persist until tensions ease surrounding Ukraine. On Thursday, peace talks between Russia and Ukraine failed to bring a cease-fire agreement. As the situation keeps deteriorating, USD bulls remain in control nearly across the market.

Adding to the bullish tone surrounding the buck, Fed’s Powell said yesterday that the central bank could consider the option of a 50 basis points rate hike if they fail to control inflation following the first series of rate increases. A more hawkish tone from the Fed in combination with solid economic data out of the US add to dollar’s appeal these days.

Against this backdrop, the USD index could confirm a break above 98.00 in the near term and target the 98.30 zone where June 2020 peaks arrive. Should some profit-taking take place anytime soon, the prices will target the immediate support around 97.80, followed by the 97.40 zone.

The raying dollar sent EURUSD to fresh long-term lows around the 1.1000 figure, Should the common currency fail to hold above this level in the near term, the pair will target the 1.0940 area next. In the longer-term, however, the euro could derive some support amid speculation of a potential interest rate hike by the ECB sooner than many anticipate.