Forex-novosti i prognoze od 09-01-2022

The latest signals from US Secretary of State Antony Blinken and Russia Deputy Foreign Minister Sergei Alexeyevich Ryabkov hint that Washington and Moscow may fail to overcome the Ukraine-linked geopolitical fears during this week’s diplomatic talks starting from Monday.

US Sec. of State Blinken said, “It's difficult to see progress when Russia holds a gun to Ukraine's head.”

“NATO troop withdrawal from Eastern Europe is not on the table,” adds the US diplomat.

Blinked concludes, “A breakthrough with Russia is unlikely this week.”

On the other hand, Russia’s Ryabkov mentioned, “It is entirely possible diplomacy with the US could cease abruptly after a single meeting on Monday.”

“Russia won't make any concessions whatsoever under pressure,” stated Russia’s Deputy Foreign Ryabkov.

Elsewhere, reports of the US weighing an export control for Russia should it invade Ukraine also challenge the market’s hopes over the Russia-Ukraine piece. Talks that the US and its allies are discussing trade restrictions against Russia and the US is considering limiting the technology transfer to Moscow were also taking rounds and raising market fears.

Axios came out with the update while saying, "A group of Russia experts urged National Security Adviser Jake Sullivan to send more arms to the Ukrainians when he spoke with them ahead of this week’s high-stakes diplomatic meetings with Russian officials."

FX implications

The news could weigh on the market sentiment, which in turn could derail the latest recovery moves of commodities and Antipodeans.

Read: AUD/USD defends dollar-led bounce off two-week low under 0.7200, yields, coronavirus eyed

“Rising energy prices may force the European Central Bank to stop ‘looking through’ high inflation and act to temper price growth,” said ECB board member Isabel Schnabel said on Saturday per Reuters.

“Green transition poses upside risks to medium-term inflation,” adds ECB’s Schnabel while speaking via video link to the annual meeting of the American Finance Association.

The ECB policymaker also said, “So far, however, there are no signs of broader second-round effects of high inflation.”

The Financial Times (FT) adds to the commentary with an additional statement from ECB’s Schnabel stating, “There are instances in which central banks will need to break with the prevailing consensus that monetary policy should look through rising energy prices so as to secure price stability over the medium term.”

FX reaction

The news may help the EUR/USD prices to keep Friday’s daily gains, the strongest in a month even as the major currency pair struggles around 1.1350 during early Monday morning in Asia.

Read: EUR/USD Price Analysis: 50-day EMA, ascending triangle challenge recovery below 1.1400

• EUR/USD grinds higher after rallying the most in one month.
• Break of 21-day EMA, bullish MACD signals keep buyers hopeful but 50-day EMA, triangle’s resistance test the advances.
• Traders will be less interested until the quote stays between 1.1265 and 1.1385-90.

EUR/USD treads water around 1.1355-60 after posting the biggest daily gains in six weeks the previous day.

Although the quote offered a decisive break of the 21-day EMA, backed by the bullish MACD signals, EUR/USD pair traders remain cautious until the prices stay between a two-month-old ascending triangle pattern.

On an immediate basis, the envelope of the 50-day EMA and the 21-day EMA, respectively near 1.1375 and 1.1325, restricts EUR/USD moves.

However, major attention will be given to the triangle’s support and resistance lines, around 1.1265 and 1.1385-90 in that order.

Should the EUR/USD prices rise past the 1.1390 hurdle, the mid-November swing high close to 1.1465 will lure the bulls before directing them to October’s bottom surrounding 1.1525.

On the contrary, a downside break of the 1.1265 level won’t hesitate to challenge the year 2021 bottom surrounding 1.1185, a break of which will open the door for an extended south-run towards the 1.1100 psychological magnet.

Overall, EUR/USD prices are likely to remain range-bound but the bearish bias stays intact.

EUR/USD: Daily chart

Trend: Sideways

• NZD/USD begins the trading week with no surprises, seesaws near Friday’s close.
• Virus woes, geopolitical fears probe bulls despite Friday’s USD weakness, US stimulus hopes.
• US job numbers came in mixed but NFP disappointment drowned the greenback.
• No major data at home for the day, inflation figures from China and US will be crucial for the week.

NZD/USD remains steady, mostly pressured around 0.6780, during the early Monday morning in Asia.

The Kiwi pair bounced off the 13-day low on Friday after the US jobs report for December triggered the US dollar weakness. However, the virus-linked challenges at home and abroad keep the Antipodeans on the backfoot. Adding to the bearish bias are the latest geopolitical fears concerning the US-China and Ukraine-Russia tussles.

Talking about US employment details for December, the headline Nonfarm Payrolls (NFP) disappointed markets with 199K figures for December versus 400K forecasts and 249K prior (upwardly revised from 210K). However, the Unemployment Rate dropped to 3.9% compared to 4.1% market consensus and 4.2% in November while the U6 Underemployment Rate that fell to 7.3% against November's downwardly revised 7.7%, both closing in the pre-pandemic levels. That said, an NFP-led disappointment was largely overruled by the Unemployment Rate and U6 Underemployment Rate.

Following the data, the US dollar portrayed the biggest daily loss in six weeks but the equities and yields couldn’t ignore market bets for the Fed rate hikes in March, recently around 80%.

It should be observed that the faster spread of the South African covid variant, namely Omicron, joins the discovery of a new virus strain, called IHU, to add to the market fears.

“New Zealand has so far managed to dodge a mass Omicron outbreak in the community, but there are serious fears of that happening as the highly transmissible variant has started to become the dominant one at the border. The Ministry of Health yesterday announced 85 community cases of Covid-19 over the previous two days and 64 cases found at the border during the same period,” said NZ Herald.

Also challenging the NZD/USD bulls is the US-China tussles continue, recently over trade and the human rights issues while Russia-Ukraine matter gains major attention ahead of this week’s Washington-Moscow meeting.

Alternatively, the US dollar’s failures to gain a pickup and hopes of overcoming the current round of virus spread with fewer problems than the previous rounds, backed by scientific studies, join firmer expectations of further stimulus from the US and China to test NZD/USD bears.

Moving on, a light calendar at home may keep the risk catalysts in the driver’s seat, suggesting further downside of the kiwi pair. However, inflation data from the US and China will be crucial to watch for the weekly guide.

Read: US Payrolls Disappoint for the Second Month: Economy seems strong despite Omicron

Technical analysis

Although a one-month-old horizontal area surrounding 0.6730-35 triggered the NZD/USD pair’s bounce on Friday, a clear upside break of the 21-DMA level of 0.6790 becomes necessary for the buyer’s return.

On the contrary, fresh selling pressure will eyes for 0.6730 before directing the NZD/USD bears towards the year 2021 bottom surrounding 0.6700.

• AUD/USD holds onto Friday’s corrective pullback from 13-day low.
• Market sentiment remains weak but NFP disappointment weighed down the greenback.
• Australia starts vaccines for children between 05-12, Queensland delays school reopening.
• Aussie Building Permits for November eyed for short-term direction, US CPI and Retail Sales are the key for week.

AUD/USD begins the second trading week of 2022 without surprises, keeping Friday’s rebound from a nearly two-week bottom around 0.7180 during early Monday morning in Asia.

Mixed prints of the US employment data for December triggered the biggest daily fall of the US Dollar Index in six weeks the previous day. The greenback’s weakness favored commodities and Antipodeans. However, a second thought on the jobs report termed it mostly in line with the Fed’s expectations and kept the rate hike woes on the table, which in turn curbed the USD losses while also weighing on the equities and favoring the Treasury bond yields.

The headline Nonfarm Payrolls (NFP) disappointed markets with 199K figures for December versus 400K forecasts and 249K prior (upwardly revised from 210K). However, the Unemployment Rate dropped to 3.9% compared to 4.1% market consensus and 4.2% in November while the U6 Underemployment Rate that fell to 7.3% against November's downwardly revised 7.7%, both closing in the pre-pandemic levels. It’s worth noting that an NFP-led disappointment was largely overruled by the Unemployment Rate and U6 Underemployment Rate.

Following the data, the US dollar and the Treasury yields dropped, helping the equities and commodities. However, the day-end readings portrayed bearish bias on Wall Street and firmer US bond yields, despite the US dollar’s failure to rebound.

Elsewhere, Australia begins vaccinations for 05-12 years children from Monday after witnessing the record high infections, despite the latest figures eased. The virus pushes Queensland to delay the yearly school reopening by a month to early February. Not only at home but the virus conditions are getting worst elsewhere even as policymakers cite scientific studies to stay hopeful.

It should be observed that hopes of US stimulus were also a positive catalyst that largely got ignored.

On a different page, the US-China tussles continue, recently over trade and the human rights issues while Russia-Ukraine matter gains major attention ahead of this week’s Washington-Moscow meeting.

Amid these plays, the AUD/USD pair remains vulnerable to the further downside even as the US dollar led recent rebound of the pair. Hence, traders will look for possible bearish hints, which in turn highlight the key risk catalysts like the covid updates and geopolitical news as the economic calendar is mostly silent for Monday, except for Australia Building Permits for November, expected 0.0% versus -12.9% prior.

Technical analysis

Despite bouncing off 23.6% Fibonacci retracement of (Fibo.) October-December downside, AUD/USD remains below stays below 20-DMA level surrounding 0.7195, not to forget keeping the pullback from the 100-DMA, near 0.7290 at the latest. The inability to cross the key moving averages joins the receding bullish bias of the MACD and steady RSI to keep sellers hopeful.

That said, fresh downside will aim for the 23.6% Fibo. retest, around 0.7125, ahead of targeting a horizontal area from August 20 near 0.7110-05.