Top Market Opportunities 14.02.2022 – 20.02.2022

14 February 2022 Amega

Fears of Attack Increase

Oil Highly Susceptible to Geos

It is a busy week as diplomatic talks around the Ukraine-Russia crisis will receive much attention from a speculative standpoint.

On Tuesday, German chancellor Scholz is due to visit Moscow and Kyiv after in an attempt to de-escalate tensions; on Wednesday, NATO’s defense chiefs meet in Brussels to discuss, well, defense; on Thursday, Russia chairs a discussion on its topic in New York as the head of the UN Security Council; and on Friday, the US vice-president Kamila Haris has an opportunity to speak to allies regarding matters of security at the Munich Security Conference.

Oil prices have been rising week in week out since December 19, and if this week closes positive, it will mark the ninth consecutive week of gains. Continued tensions are likely to keep prices high as nearly all days of the week have something in store for commodity traders.

Crude trading near triple digits is likely to bring more players in, with the $100/bbl becoming a magnet zone. At $93, WTI has much work to do to get there, but given the geopolitical situation, it could even reach the level this week should tensions not ease or escalate further. $88/bbl make the first decent support.

FOMC Minutes Now Overshadowed?

On the economic front, traders wait to receive the minutes from the last FOMC meeting to gather clues about Fed’s plans on Wednesday. However, that will be a secondary event now as the Committee has decided to hold an emergency meeting on Monday amidst the final hightened inflation print. More detailed insights over inflation are expected on Wednesday’s event, but if the Fed decides to surprise markets on Monday with one or two immediate hikes, markets will be impacted massively.

Dow trades below its 200-day and 50-day averages, but the fast MA has not crossed the slow one yet. This will take a beating to occur any time soon unless the ‘surprise’ scale allows.

The index is near its swing low at 34620, with the next level of support at 33835 and 33150 on the table. A geopolitical escalation or a Fed surprise could see these levels cut sliced through easily and making up room for 31600 and 30k, depending on the importance of the potential events. Inversely, if the situation improves and the Fed’s emergency meeting is a non-event, Dow could take a breather at its 200-day average near 32230, and although unlikely even up to the 100-day average near 35520.

Busy Week for the UK

Following BoE’s hike, of note is the UK’s CPI release on Wednesday, along with its jobs data coming out first on Tuesday, but the former event is more critical for policy. Economists expect UK’s inflation to reach 5.4% again on higher energy costs and the usual covid-inflicted supply issues. With prices growing up fast in non-energy-related costs, markets start to look concerned about further hikes. Data showed the market continued to grow on the jobs market but started the year off slow. If it remains the case, it would add to rising concerns, indicating the economy is slowing down.

The pound has been mixed lately as participants are trying to figure out whether BoE’s hawkishness can support the UK’s economy at this stage or not. Cable trades below its 200-day average but above its 50-day. So, until we get more clarity this week, prices will likely remain within the $1.3510-1.3610 tight range. After that, and depending on the outcome of the reports, resistance lies at 1.3673, whereas support at $1.3415.

Can Gold Continue its Ascend?

The current sentiment around geopolitics and policy calls for increasing demand in safe-havens. Inflation prints show an early signal of recession as hikes alone might not do the trick, and fears of enacting a war at Europe’s doorstep don’t seem to dissipate any time soon. Gold prices are back to $1850 again and remain highly susceptible to developments around US-Russia for now.

Back to the beginning, if none of the scheduled talks around Ukraine and Russia lead to some relief, gold will likely continue to ascend with the first point of resistance around the previous top of $1880/oz. Above its 200-day and 50-day averages, it could even attempt $1920/oz if things escalate or show no signs of compromise. On the flip side, support awaits bulls at around the MAs, at $1816/oz and $1997/oz. However, getting there will depend on diplomacy and whether talks are good enough to break $1837/oz.

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