EUR/USD LOSES THE GRIP AND CHALLENGES 1.1300 AHEAD OF ECB

14 February 2022, 11:41

• EUR/USD revisits the 1.1300 region on Monday.
• The dollar remains bid amidst persistent risk aversion.
• US 10y yields trade on the defensive near the 1.90% mark.

The single currency sheds further ground and forces EUR/USD to put the 1.1300 support level to the test on Monday’s European morning.

EUR/USD looks to geopolitics, risk aversion

EUR/USD retreats for the second session in a row and extends further the rejection from last week’s tops near 1.1500 the figure soon after the release of US inflation figures for the month of January (February 10).

In addition, the focus of attention remains on the short end of the yield curve in both the US and German cash markets as important drivers of the pair's price action, particularly folllowing the last FOMC and ECB events. In the meantime, German 10y Bund yields keep correcting lower following recent tops, widening at the same time the spread differential vs. its American peer, which remains another source of weakness for the pair at the beginning of the week.

Nothing scheduled data wise on both sides of the Atlantic, although the speech by Chair Lagarde later in the old continent should garner some attention.

What to look for around EUR

EUR/USD could not sustain the post-US CPI raise to the vicinity of the 1.1500 barrier, sparking a corrective move to the boundaries of 1.1300 on the back of the renewed and quite strong bias towards the US dollar. Despite the ongoing knee-jerk, the improvement in the pair’s outlook appears underpinned by fresh speculation of a potential interest rate hike by the ECB at some point by year end, higher German yields, persevering elevated inflation and a decent pace of the economic activity and other key fundamentals in the region

Key events in the euro area this week: ECB Lagarde (Monday) – Advanced EMU Q4 GDP, EMU/Germany ZEW Economic Sentiment (Tuesday) – EMU Industrial Production (Wednesday) – Flash EMU Consumer Confidence (Friday).

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine conflict.

EUR/USD levels to watch

So far, spot is retreating 0.27% at 1.1314 and faces the next up barrier at 1.1491 (200-week SMA) seconded by 1.1494 (2022 high Feb.10) and finally 1.1656 (200-day SMA). On the other hand, a break below 1.1303 (weekly low Feb.14) would target 1.1186 (monthly low Nov.24 2021) en route to 1.1121 (2022 low Jan.28).

USD/CAD JUMPS BACK CLOSER TO 1.2800 MARK AMID RETREATING OIL PRICES, STRONGER USD

14 February 2022, 12:11

• A combination of supporting factors pushed USD/CAD to over a one-week high on Monday.
• Retreating oil prices undermined the loonie and extended some support amid stronger USD.
• Hawkish Fed expectations, the risk-off impulse continued benefitting the safe-haven buck.

The USD/CAD pair quickly retreated a few pips from over one-week high touched in the last hour and was last seen trading around the 1.2765 region, still up over 0.60% for the day.

The pair caught fresh bids during the early European session and broke out its intraday consolidation phase, with bulls now looking to build on last week's rebound from the monthly low. Despite the risk of a further escalation in the conflict between Russia and the West over Ukraine, crude oil prices pulled back from a more than seven-year high touched earlier this Monday. This, in turn, undermined the commodity-linked loonie and provided a goodish lift to the USD/CAD pair amid fresh US dollar buying.

The greenback remained well supported by growing acceptance that the Fed will tighten its monetary policy at a faster pace than anticipated to combat stubbornly high inflation. In fact, the markets have been pricing in the possibility of a 50 bps Fed rate hike move in March. The bets were boosted further after data released last Thursday showed that the headline CPI reached the highest level since February 1982 and the core CPI, which excludes food and energy prices, climbed 6.0% from a year ago.

Apart from this, the risk-off impulse – as depicted by a sell-off across the equity markets – further benefitted the greenback's safe-haven status. This was seen as another factor that contributed to the USD/CAD pair's strong intraday positive move. The global risk sentiment took a hit after US National Security Advisor Jake Sullivan warned on Sunday that “we are in the window where a Russian invasion of Ukraine could begin at any time and could happen during the Beijing winter Olympics.”

It, however, remains to be seen if bulls are able to capitalize on the move or the USD/CAD pair continues with its break through the 1.2800 mark amid absent economic releases from the US or Canada. Hence, the market focus will remain on geopolitical developments, which will influence oil price dynamics. Apart from this, traders will take cues from the broader market risk sentiment. This, along with the US bond yields, will drive the USD demand and provide some impetus to the USD/CAD pair.

GOLD PRICE FORECAST: XAU/USD EYES A RALLY TOWARDS $1,878 AMID UKRAINE TENSIONS – CONFLUENCE DETECTOR

14 February 2022, 11:06

• Gold price gathers strength for the next upswing towards $1,878.
• US inflation concerns and the Russia-Ukraine turmoil to offer support.
• Gold corrects before resuming uptrend, focus on Russia-Ukraine crisis.

Gold price is taking a breather after a blistering $40 rally seen on Friday, which drove the bright metal to the highest level in three months at $1,866. Reports about a potential Russian invasion of Ukraine this week roiled markets and triggered a massive flight to safety into gold price. The bullion remains in a win-win situation going forward amid rising inflation concerns and as investors watch over the geopolitical risks concerning Ukraine. Gold traders also await Wednesday’s US Retail Sales data and the Fed minutes for fresh directives.

Read: Russia could initiate military action before the end of the Winter Olympics: Could this affect stocks?

Gold Price: Key levels to watch

The Technical Confluences Detector shows that the gold price has recaptured powerful support now resistance at $1,855, as its corrective pullback fades.

That level is the convergence of the Fibonacci 23.6% one-day and the previous month’s high.

The immediate upside barrier is seen at the Bollinger Band one-day Upper at $1,859. The next bullish target appears at the previous day’s high of $1,866.

Acceptance above the latter will fuel a fresh upswing towards $1,878, the pivot point one-day R1.

On the flip side, if gold price finds a strong foothold below the aforementioned $1,855, then the Fibonacci 23.6% one-week at $1,851 will get tested.

Further down, the Fibonacci 38.2% one-day at $1,848 will come to buyers’ rescue. The last line of defense for gold bulls is aligned at $1,843, the intersection of the Fibonacci 38.2% one-week, SMA10 four-hour and pivot point one-month R1.

Here is how it looks on the tool

About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.

GBP/USD: 1.3500 ALIGNS AS CRITICAL SUPPORT

14 February 2022, 12:20

GBP/USD has declined toward 1.3500 pressured by risk aversion. The bearish pressure could ramp up in case that levels turn into resistance, FXStreet’s Eren Sengezer reports.

1.3520 forms the first technical resistance

“1.3500 (psychological level, Fibonacci 50% retracement of the latest uptrend) aligns as critical support. If a four-hour candle closes below that level and uses it as resistance, the next bearish target is located at 1.3470 (Fibonacci 61.8% retracement) ahead of 1.3440 (static level).”

“On the upside, 1.3520 (Fibonacci 38.2% retracement) forms the first technical resistance before the 1.3550/1.3560 area (200-period SMA, Fibonacci 23.6% retracement).”

 

GOLD PRICE FORECAST: XAU/USD REVIVES HOPES AMID RUSSIA-UKRAINE GEOPOLITICAL RISKS

14 February 2022, 09:04

Gold price is trading around $1,850, retreating from three-month highs of $1,866, as investors take profits off the table after the recent upsurge. But as FXStreet’s Dhwani Mehta notes, XAU/USD is set to resume the uptrend.

Golden cross remains in play

“The looming geopolitical tensions between Russia and Ukraine will remain the biggest risks for markets, which could potentially keep gold underpinned.”

“Immediate support is seen at $1,846, the 23.6% Fibonacci Retracement level of the rally from January 28 that peaked out last Friday. Further south, the February 10 highs of $1,842 will be tested, below which floors could open up towards 38.2% Fibo level of the same ascent.”

“The correction appears short-lived for gold, as the golden cross remains in play while the 14-day Relative Strength Index (RSI) still holds comfortable above the central line, despite the latest downtick.”

“If buyers regain poise, then a retest of the multi-month highs at $1,866 will be inevitable. The next critical resistance area is seen around $1,870-$1,872 price zone, which is the November peaks.