Currency Markets Remain Cautious Amid Expected New Sanctions On Russia

5 April 2022, 03:06

Market Focus

U.S. stocks gained on Monday as investors monitored the potential for more sanctions against Russia amid ongoing concerns over inflation and global economic growth. The S&P 500 rose, and the Nasdaq Composite gained more than 1% as technology shares outperformed. Shares of Twitter (TWTR) soared by more than 20% after Tesla (TSLA) CEO Elon Musk disclosed that he now owns about 9.2% of the social media company. The Dow Jones joined the S&P 500 and Nasdaq in the green and shook off earlier losses.

Citigroup Inc. is among underwriters that have temporarily paused initial public offerings of new U.S. special purpose acquisition companies (SPAC) until they get more clarity on the potential legal risks posed by recently proposed rules, according to people with knowledge of the matter.

The New York-based bank is awaiting feedback from legal advisers regarding underwriter liability among other topics, said a source with knowledge of the matter, who requested anonymity because the bank’s decision isn’t public. The firm has no plans to exit the business.

Last week, the Securities and Exchange Commission (SEC) issued a sweeping plan for tightening oversight of SPACs after U.S. lawmakers and investor advocates argued the listings were bypassing rules imposed on traditional IPOs and exposing retail shareholders to risks. The SEC’s proposal would broadly require SPACs to disclose more information about potential conflicts of interest and make it easier for investors to sue over false projections.

Citigroup is among the U.S.’s most prolific SPAC underwriters, ranking second in 2020 and first in 2021. Over the two years, it raised $31.6 billion from 146 IPOs.

Main Pairs Movement:

Most major pairs struggled for direction on Monday as market participants remained cautious ahead of the announcement of new sanctions on Russia. The EUR was the worst performer and the AUD was the best one.

The focus remains on the Eastern Europe crisis. As announced, Moscow has moved troops away from Ukraine’s northern region. However, Kyiv reported the massacre of civilians and war crimes, which have resulted in western nations announcing plans to add sanctions on the Kremlin.

As of writing, the EUR/USD pair is trading at around 1.0960, while AUD/USD is trading near a fresh 2022 high of 0.7555. The GBP/USD pair is stable at around 1.3110, while USD/CAD is hovering around 1.2485. The USD/JPY pair is unchanged at around 122.80, as USDCHF changes hands at 0.9260.

Gold advanced within range, finishing the day at around $1,930 a troy ounce. Crude oil prices edged also higher, with WTI settling at $103.80, and Brent at $107.90

The yield on the 10-year Treasury note stands at 2.42%, while that on the 2-year note is currently at 2.43%. The inverted yield curve spurred recession-related concerns, although the market’s reaction has been limited so far. Nevertheless, mounting concerns hint at potential gains for safe-haven assets.

Technical Analysis:

AUDUSD (4- Hour Chart)

AUDUSD overstepped the 0.7500 level on Monday, advancing right from the first tick of the trading session. The Aussie gained support at the expectation of a ceasefire between Russia and Ukraine and the upsurge of commodity prices. From the technical perspective, intraday upside momentum officially brings AUDUSD out of the consolidated phase, reclaiming the bullish mode above 0.7536. As the RSI has not yet reached the overbought territory with the MACD indicator turning upward, some follow-through buying will be seen as a fresh trigger for bullish traders to push the currency pair further north. The immediate resistance at 0.7600 will be the next target for AUDUSD to achieve. On the flip side, any meaningful pullback will see the support level at 0.7471. Failure to defend the 0.7471 level will trigger a downside momentum to slide further toward 0.7432.

Resistance:  0.7600

Support: 0.7471, 0.7432

Gold continues to hover above $1930 as the uncertainty over Ukraine persists. Nonetheless, the gain of the benchmark 10-year Treasury bond yield has capped gold’s upside force. On the technical side, gold has been fluctuating between $1951 and $1923 in the past week. Given the recent pullback above the 20 SMA, gold has regained a positive tone in the short- term. At the moment, gold is waiting for strong follow-through buying or selling before positioning for any further breakthrough. Gold has to find acceptance above $1951 in order to turn bullish. On the flip side, failure to defend the support level at $1923.7477 will make it slide further south.

Resistance: 1951.78, 1974.4363

Support: 1923.7477, 1878.4351

Nasdaq 100 (Daily Chart)

The Nasdaq 100 edged higher on Monday at the time of writing as the markets shake off recession fears. Notably, Twitter surged more than 27% following the news that Elon Musk bought a 9.2% passive stake in the company. From the technical perspective, if the Nasdaq can finish positive at the end of the day, it will become bullish in the near- term. In order to climb back to the previous bullish trend, the Nasdaq has two more resistances to break, 15706.46 and 16457.63. At the moment, the upside continues to attract more buyers as the RSI has not yet reached the overbought territory while the MACD remains robust on the bullish side.

Resistance: 15689.53, 16457.63

Support: 15024.28, 14486.62