Diplomacy Optimism Boosts Risk Sentiment
EUR/USD => The pair rises above 1.1350
Gold => The commodity eases from an 8-month high
FTSE => The index rises above 7550
EUR/USD Rises Ahead of EZ Consumer Confidence
EUR/USD is edging higher after booking small losses yesterday. The euro failed to capitalize on the weaker USD, as fears over a Russian invasion into Ukraine dominated.
Today those fears have eased slightly allowing the Euro to climb. ECB Chief economist Philip Lane, adopted a less dovish bias, backing policy normalization, helping lift the euro.
The ECB is under pressure from the market to raise rates from the current -0.5% as inflation hits 5.1%. Today, eurozone consumer confidence for February is expected to show a slight improvement to in February as Omicron restrictions are removed. Fed speakers later today are also like to influence the USD.
| US Jobless claims
EZ Consumer confidence |
Actual: 248k (23k)
Expected: -8 (-0.5) |
Previous: 225k
Previous: -8.5 |
What’s next for EUR/USD?
EUR/USD is trading a few pips higher, trading above its multi-week rising trendline and above its 50sma in a mildly bullish trend. The price has been capped on the upside by 1.1390/1.1400 zone an area that has acted as resistance several times across the last few months. Buyers will look for a break above this level to target 1.1490, the double top.
A break above here would be significant and could see the buyers gain momentum towards 1.16, the November high. On the downside, a break below 1.1280 the February 12 low, could open the door to 1.1225, a level that has acted as a support on several occasions.
Gold Eases From 8-Month High
Gold surged higher in the previous session as Russia, Ukraine tensions ramped up. The two sides traded accusations of firing across a ceasefire line, whilst NATO raised doubts over Russia’s claims of pulling troops off the border area.
Risk sentiment declined rapidly lifting gold to an 8-month high of 1903. Today is a new day and optimism that a diplomatic solution is possible is taking the shine off safe-haven gold. However, Gold is also supported by the dialing back of expectations of a 50-basis point rate hike in March, following less hawkish than expected Fed minutes. Russia, Ukraine headlines and Fed speak are likely to influence gold today.
FTSE Rises as Risk Sentiment Improves, Retail Sales Due
The FTSE is moving cautiously higher amid optimism that Russia and Ukraine will find a diplomatic solution after the US Secretary of State agreed to meet with Russia’s foreign minister next week. The move has boosted risk appetite.
Russia headlines will continue to be the market’s main focus. UK retail sales are also expected to be released. Retail sales are expected to rise in January, rebounding from weakness in December as Omicron hit. Strong sales would indicate that consumers are still spending despite high inflation and could boost market sentiment further.
| UK retail sales MoM Jan | Expected: 1% (4.7%) | Previous: -3.7% |
Support can be found at 7470 (50 sma) and 7350 (rising trendline support).
Resistance for the pair can be seen at 0.7625 (January 20 high) and 7690 (2022 high).
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