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.

Against this backdrop, the safe-haven gold opened sharply higher today. The precious metal extended initial gains to the $1,927 area before attracting some profit-taking. As dip buyers reemerged, the bullion has bounced back above the $1,900 figure that remains in the market focus during the European trading hours.

The $2,000 barrier in focus

Last week, gold prices rallied to September 2020 highs around $1,975 in a knee-jerk reaction to Russian President Vladimir Putin’s “special military operation” in eastern Ukraine. The bullion has corrected lower since then but stays elevated while clinging to the $1,900 handle, with upside risks persisting as long as the developments in Ukraine stay in the market focus.

As such, the yellow metal could see some deeper losses in the near term in case of a more aggressive technical retreat. However, the overall trend remains bullish, and it looks like the bullion could target the $2,0000 figure for the first time since August 2020 in the coming weeks.

In the immediate term, as Russia-Ukraine talks in Belarus have started, XAUUSD could struggle to see fresh gains as risk aversion has abated somehow, with investors expressing hope for some progress towards resolving the crisis. Should the outcome of the negotiations disappoint, however, safe-haven demand may push the prices back to the $1,930 zone, followed by the $1,960 intermediate barrier on the way towards the mentioned highs.

The overall optimism looks too fragile to bet on further gains in equity markets in the coming days, with the geopolitical backdrop posing substantial risks for high-yielding assets across the globe.

Of note, according to the latest news on this front, the US warned Ukraine of a full-scale Russian invasion within 48 hours. There are also reports that there has been a cyberattack in Ukraine. Meanwhile, the UN chief warranted that if Ukraine's conflict expands, the world could see a scale and severity of need unseen for many years. Furthermore, Ukraine has now announced a state of emergency which will start from midnight February 24.

Dollar claws back losses

Amid the latest headlines, the renewed risk aversion helped the safe-haven dollar claw back intraday losses versus most counterparts, with the USD index turning slightly positive on the day in recent trading. The greenback is now trying to regain the 96.00 figure that has been in the market focus since the plunge witnessed in late January. A daily close above this level would somehow improve the near-term technical picture while the key immediate upside target arrives in the 96.45 area that capped the momentum last week.

It looks like the situation surrounding Ukraine will stay tense in the coming days, which would be positive for the safe-haven dollar. Also, the buck remains supported by a hawkish Fed, with the central bank planning to start hiking rates as soon as March. On the other hand, however, the Federal Reserve could prefer a more cautious approach to tightening in the months ahead, citing rising geopolitical uncertainty that could persist in the long term.