Risk-off trade as Russia sends troops over the Ukraine border
S&P => The index falls to a monthly low
Home Depot => The stock trades around a monthly low
EUR/JPY => The pair falls to a 3-week low
S&P falls as Russian forces enters Ukraine
S&P futures fell on Monday, although the stock market remained closed owing to the public holiday. Risk aversion meant that riskier assets were out of favour, while demand for safe havens such as the Japanese yen, Swiss Franc and gold rose.
Futures are falling sharply today as all eyes remain on eastern Europe. Russian forces have entered into parts of Ukraine, after Putin recognised some rebel occupied regions as independent.
US data is due today, although is likely to be overshadowed by developments on the Russia, Ukraine border. US business activity is expected to rise as the service sector rebounds from Omicron.
| US Services PMI | Expected 53 (1.8) | Previous: 51.2 |
Where next for S&P 500?
The S&P is extending it decline after hitting resistance at 4590 on February 10. The price has fallen below its 200 sma, in addition to the bearish RSI are keeping sellers optimistic of further downside.
The index briefly broke below support at 4275, falling to 4255 before attracting buyers back in and pushing the price back up this key level. A meaningful break below 4275 is need in order to test 4220 and marking a double bottom.
A break below here could spark a much deeper selloff. On the upside, resistance can be seen at 4420 the falling trendline and 18 February high. A move over the 200 sma at 4480 could negate the near term down trend.
Home Depot Q4 earnings preview
Home improvement retailer Home Depot is due to report fourth quarter results today.
The stocks’ earnings come as the share price has fallen over 15% since the start of the year, after hitting an all-time high of $420 at the end of last year. The stock did very well across the pandemic, however concerns of a slowdown have hit the share price.
Expectations are for EPS of $3.22, which marks 18% year on year growth, from $2.74 reported in the same period last year. Revenue is expected to rise 7% to $34.6 billion thanks to a busy holiday period. However, the focus will be on the outlook given that a marked slowdown in growth for the current year. 2.4% growth in sales is expected and a more muted 4.4% rise in EPS for 2022.
EUR/JPY falls despite upbeat data
The euro fell 0.3% against the Japanese yen on Monday as fear surrounding Russia invading Ukraine overshadowed encouraging Eurozone data.
German producer prices rose to the highest level on record in January, suggesting that inflation is likely to continue rising in the eurozone’s largest economy. Meanwhile, eurozone business activity rebounded firmly in February as the Omicron impact, particularly in the customer facing service sector was short lived.
The pair is falling again today as tensions remain high on the Russia Ukraine border driving demand for the safe haven yen. Putin has sent troops into Ukraine and the West is preparing to sanction Russia. Today German IFO Business sentiment is due, although geopolitical headlines are likely to dominate.
| EZ Composite PMI
Ger. IFO Business Sentiment |
Expected: 55.8 (3.5)
Expected: 96.5 (0.8) |
Previous: 52.3
Previous: 95.7 |
Support can be found at 129.00 (February 2 low) and 128.24 (2022 low).
Resistance for the pair can be seen at 130.11 (50 sma) and 1.31.40 (100 sma).
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