Roller Coaster Rides in Markets as Russia Invades Ukraine

Market overviews

The markets had a roller coaster ride on Russia’s invasion of Ukraine last week. At the time of writing, Kyiv remains in Ukrainian hands after three days of brutal attack by Russia. Wave of European leaders have start delivering supplies Ukraine while packages of sanctions were imposed, up to Russian President Vladmir Putin. It’s also reported that cutting of Russia from SWIFT payment system would be taken in a matter of days.

Global stocks took a strong U-turn after initial dive during the week. But risks will remain on the downside for the near term at least. Gold and oil prices spiked higher but quickly retreated. More upside is still in favor in both risk sentiment commodity. In the currency markets, Aussie and Kiwi ended as the strongest ones for the week, followed by Canadian. European majors were also hammed, with Sterling as the worst. Dollar and Yen just ended mixed.

S&P closed the week up, but still more downside expected

S&P 500 staged a strong U-turn after diving to as low as 4114.65 and closed at 4384.65, added 35 pts for the week. 55 week EMA (now at 4307.38) was defended for now. But overall, price actions from 4818.62 is seen as developing into a correction to whole up trend from 2191.86.

Deeper fall is expected as long as 4595.31 resistance holds. SPX would target 38.2% retracement of 2191.86 to 4818.62 at 3815.19. Break of 4595.31 might bring stronger rebound. But even in this case, upside should be rejected by 4818.62 to bring at least one more falling leg.

The picture DAX is similar. Price actions from 16290.19 are developing into a correction to whole rise from 8255.65. Deeper decline is expected to 38.2% retracement of 8255.65 to 16290.19 at 13220.99.

Nikkei is also in correction to the up trend from 16358.19 to 370795.77. Deeper fall should be seen to 38.2% retracement oat 25280.61.

Dollar index struggled to break through 97.72 fibonacci level

Dollar index edged higher to 97.73 last week, but couldn’t break through 61.8% retracement of 102.99 to 89.20 at 97.72. Upside momentum is also relatively weak as seen in weekly MACD. Still, further rise is in favor as long as 94.62 support holds. Sustained break of 97.72 could bring upside acceleration towards 102.99 high. However, break of 94.62 support will now suggest medium term topping and bring deeper pull back.

Gold, another rally to retest 2074 still expected after volatile week

Gold had an extremely volatile week, spiking higher to 1974.32 but close the week down at 1888.06. Some range trading should be seen for the near term. But downside should be contained above 1853.70 cluster support (61.8% retracement of 1780.10 to 1974.32 at 1854.29) to bring rebound.

At this point, the correction from 2074.84 is seen as completed at 1682.60. Another rise is expected, at a later stage, through 1974.32 to retest 2074.84 high. Nevertheless, firm break of 1853.70 will dampen this week and extend the correction with another falling leg.

WTI oil to consolidate after spiking to 102.19

WTI crude oil spiked higher to 102.19 last week but quickly retreated to close at 93.35. Some consolidation below 102.19 is likely for the near term. But downside should be contained by 38.2% retracement of 62.90 to 102.19 at 87.18 to bring rebound. Recent up trend is still expected to continue after the consolidation completes. Next target level will depend on the eventual depth of the correction.

GBP/AUD building up medium term bearishness with sharp decline

GBP/AUD was the biggest mover last week, losing -2.14%. For now, further decline will be expected as long as 1.8825 resistance holds, to 1.8123 support. Decisive break there will confirm that whole rise from 1.7412 has completed already. The three wave structure suggests that it’s just a corrective move. In this case, the larger down trend from 2.0840 could be ready to resume through 1.7412 low in the medium term .

GBP/JPY Weekly Outlook

GBP/JPY dropped sharply to 153.34 last week but recovered. Initial bias is neutral this week first. But further decline is expected with 155.48 resistance intact. Fall from 158.04 is seen as the third leg of the corrective pattern from 158.19. Break of 152.88 will target 148.94 support next. However, firm break of 155.48 will dampen this view and turn bias back to the upside for 158.04 resistance instead.

In the bigger picture, price actions from 158.19 are seen as developing into a consolidation pattern to up trend from 123.94 (2020 low). Downside should be contained by 38.2% retracement of 123.94 to 158.19 at 145.10 to bring rebound. Firm break of 158.19 will resume the up trend to long term fibonacci level at 167.93. However, sustained break of 145.10 will raise the chance of trend reversal and target 61.8% retracement at 137.02.

In the longer term picture, as long as 55 month EMA (now at 147.27) holds, we’d still favor more rally to 61.8% retracement of 195.86 to 122.75 at 167.93. But sustained trading below 55 month EMA will at least neutralize medium term bullishness and re-open the chance of revisiting 122.75 low (2016 low).