Invasion of Ukraine: four volatile markets to watch

Volatility looks likely to persist into the week as hostilities in Ukraine evolve and keep traders on edge. Some rapid-fire developments in recent days have shifted market sentiment. Risk assets fell at Monday’s open due to the latest sanctions on Russia and innuendo from Russian President Vladimir Putin about preparing the country’s nuclear force. Sentiment recovered as reports that diplomatic talks between Ukrainian and Russian authorities have been agreed to and would be held on the Belarusian border. The situation, as it has been from the start, is rapid, dynamic and fluid. Nonetheless, here are four markets to watch as the crisis unfolds.

Oil

The fresh package of sanctions over the weekend has raised the risk of a tit-for-tat trade war between Russia and the West, while the freezing out of Russian financial institutions from SWIFT could slow payments and trade flows for energy. The prospect of further supply disruptions fuelled another surge in oil prices, pushing the price above technical resistance at 95.60. After bouncing off trend line support, the trend for WTI remains skewed to the upside. Although upward momentum is slowing for crude, with the daily RSI showing bearish divergence and price failing to – as yet – make a fresh higher high.

The fresh package of sanctions over the weekend has raised the risk of a tit-for-tat trade war between Russia and the West, while the freezing out of Russian financial institutions from SWIFT could slow payments and trade flows for energy. The prospect of further supply disruptions fuelled another surge in oil prices, pushing price above technical resistance at 95.60. After bouncing off trend line support, the trend for WTI remains skewed to the upside. Although upward momentum is slowing for crude, with the daily RSI showing bearish divergence, and price failing to – as yet – make a fresh higher high.

Gold

Price action continues to look constructive for gold, with the latest sanctions on Russia announced over the weekend sending price back above $US1900 as traders front-run the flight to gold as big-Russian-money assets are frozen. Despite the jump, sellers have again emerged above technical resistance around $US1910, in large part due to the rip higher in the US Dollar today. That level presents as the key one for gold, which if closed above on the daily charts may open a re-test of $US1960 resistance. On the downside, support can be found at around $US1880.

US Dollar Index

A run to US Dollar’s, on fears of a liquidity shock to global markets from sanctions on Russian banks and the heightened risk of financial crisis in the county and perhaps across Europe, has pushed the greenback towards higher-highs. FRA-OIS spreads – a measure of Dollar liquidity, or the cost of Dollars – jumped to its highest level since March 2020 today, in an ominous sign for global markets. The US Dollar Index clearly sits in an uptrend, with the next resistance level to watch the index’s recent higher-high at 97.70. Meanwhile, support sits around the 20 and 50 day moving averages, with trendline support currently around 95.70.

NASDAQ

Tech stocks have been amongst the most beaten up off the back of the Ukraine-Russia crisis, with the skirmish exacerbating inflation pressures and raising the risks of tighter global monetary policy. Bets for Fed rate hikes have been unwound today. However, the underperformance of growth stocks, as commodity prices fuel a rise in value names, has kept the NASDAW under pressure. We expect the index to open around 2.4% lower tonight. As price continues to expand its broadening formation, key support can be found slight above 13,700 and 13,000. Resistance is around 14,080 and 14,410.

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