US and European futures are starting the week on the back foot as traders pick up momentum from the Asian session where red was the dominant colour. Several factors are influencing the price action today. For instance, Chinese Silicon Valley Province Shenzhen has gone in a lockdown has raised alarm bells among investors about a strong possibility of supply chain disruptions. This means that the entire tech sector, especially the NASDAQ, is likely to be highly volatile. Traders are also watching the geopolitical tensions in Ukraine, and the recent news that Russia has asked China for help is worrisome for traders. In addition to this, we have a week full of firecrackers in terms of economic data as some Banks: the Fed and the BOE, will announce their monetary policy decisions.
Economic data And Forex
This week is fully action-packed for the forex market. The most crucial event is, of course, the Fed meeting. The questions that traders have in mind are what the Fed believes about the ongoing war in Ukraine and its influence on the US economy. Secondly, the influence of economic sanctions imposed by the US on Russia.
Before the war, the significant conversations were about speculation of the Fed interest rate hikes and how many interest rate hikes we will see this year. More importantly, how much the Fed will hike interest rates this month. Under the current circumstances, forex traders and market players only expect a 25 basis points rate hike. Anything more than that could trigger a significant sell-off in the equity markets, as we don’t know how the Russian sanction will influence economic growth.
Nonetheless, the dollar index is likely to rally significantly on the back of this, which means forex pairs such as EUR/USD and GBP/USD are likely to feel more pressure.
Oil prices are likely to remain highly sensitive, especially after the weekend event. War in Ukraine intensified around Ukraine’s capital. Traders are paying close attention to reports that Russian forces hit a military training centre near Lviv near the Poland border. Any attacks near Poland make the situation even more complicated. Poland is part of NATO, and several government officials, including the US, have said that they will do everything to protect the NATO boundary. Oil traders have been hoping that they will get better news on the Russia and Ukraine war as there was some optimism that peace talk between the nations was moving in the right direction. However, the weekend’s events have disrupted that optimism, and we are expecting the oil prices to continue their bull run and remain immensely volatile.
One more important factor that oil traders certainly want to keep in front of them is Iran’s nuclear deal. The fact is that the world is desperate for more oil, and traders want to see this deal come to fruition. However, recent reports indicated ballistic missiles hitting some parts of Iraq, and US officials have blamed Iran’s militia groups. An important thing for traders to note is that this kind of attack has not happened for several months, and the fact that this has occurred now has made the situation more complicated. Expectancies are diminishing, but traders hope that some good news will hit wires.
The precious metal and also known as the ultimate safe-haven asset is likely to remain in demand this week as well. In terms of economic data, of course, we have the most significant event of this year (until now) taking place this week—the Fed’s monetary policy. They are expected to increase the interest rate. Generally speaking, such an event would have been immensely bearish for the dollar price as the dollar index would have skyrocketed on the back of an interest rate hike news. However, the war in Ukraine keeps on pushing traders toward haven, and they believe that the Fed’s monetary policy under the current situation doesn’t hold much value.
It is highly likely that gold price, which may surge until the event, would see some retracement as the dollar index is bound to move higher, a significant denominator for the gold price.
Bitcoin failed to produce any clear direction over the weekend. It seems that crypto traders do not know much about Bitcoin prices. The tug war between the bulls and the bears has confused traders, but one thing is clear: in this tug war, it was bears who have been winning the battles. But this doesn’t mean they have won the war, as history is clearly on the side of the BTC bulls.
Going into this week, traders will be looking at two essential price levels, and both of them are extremely important for the BTC price. Firstly, the support is at 30K, and secondly, the resistance is at 50K. The BTC price needs to break out of this ugly consolidation zone, and only then we could see that a new trend has formed.