Markets had a rollercoaster ride during Russia’s invasion of Ukraine last week. As of this writing, Kyiv remains in Ukrainian hands after three days of brutal Russian attack. A wave of European leaders began delivering supplies to Ukraine as sanctions packages were imposed, including Russian President Vladmir Putin. It was also reported that the removal of Russia from the SWIFT payment system would be taken within days.
Global equities flip-flopped after plunging during the week. But the risks will remain on the downside, at least in the short term. Gold and oil prices soared but quickly retreated. More upside is still in favor of both risk sentiment and commodities. In the currency markets, the Aussie and the Kiwi finished as the strongest for the week, followed by the Canadian. European majors also suffered, with the pound the worst. The dollar and the yen have just ended up mixed.
S&P closed the week up, but still more downside expected
The S&P 500 made a strong U-turn after plunging as low as 4114.65 and closing at 4384.65, adding 35 points for the week. The 55-week EMA (now at 4307.38) has been defended for now. But overall price moves from 4818.62 are seen as turning into a correction to the overall uptrend from 2191.86.
A deeper drop is expected as long as 4595.31 resistance holds. SPX would be targeting a 38.2% retracement from 2191.86 to 4818.62 at 3815.19. The breakout of 4595.31 could bring a stronger rebound. But even then, the upside would need to be rejected by 4818.62 to bring at least one more leg down.
The DAX picture is similar. Price moves from 16290.19 turn into a full upside correction from 8255.65. A deeper decline is expected to a 38.2% retracement from 8255.65 to 16290.19 at 13220.99.
The Nikkei is also correcting the uptrend from 16358.19 to 370795.77. A deeper drop should be seen down to the oats 38.2% retracement at 25280.61.
The dollar index struggled to break through the Fibonacci level at 97.72
The dollar index rose slightly to 97.73 last week, but was unable to cross the 61.8% retracement from 102.99 to 89.20 at 97.72. The bullish momentum is also relatively weak, as shown by the weekly MACD. Still, further upside is in favor as long as 94.62 support holds. A sustained break of 97.72 could lead to an acceleration up to 102.99 high. However, the break of the 94.62 support will now suggest a medium-term top and bring a deeper pullback.
Yet another rally to retest 2074 still expected after a volatile week
Gold had an extremely volatile week, reaching 1974.32 but closing the week at 1888.06. Some range swaps should be considered in the short term. But the decline should be contained above the cluster support at 1853.70 (61.8% retracement from 1780.10 to 1974.32 to 1854.29) to provide a rebound.
At this point, the correction from 2074.84 is considered complete at 1682.60. Another rise is expected at a later stage to 1974.32 to retest the 2074.84 high. Nonetheless, the firm break of 1853.70 will ease this week and extend the correction with another leg down.
WTI oil to consolidate after hitting 102.19
WTI Crude Oil climbed to 102.19 last week but quickly retreated to close at 93.35. Some consolidation below 102.19 is likely in the near term. But the decline should be contained by a 38.2% retracement from 62.90 to 102.19 at 87.18 to bring a bounce. The recent uptrend should still continue once the consolidation is over. The next target level will depend on the eventual depth of the correction.
GBP/AUD is building a medium-term downtrend with a steep decline
GBP/AUD was the biggest mover last week, losing -2.14%. For now, further decline is expected as long as 1.8825 resistance holds down to 1.8123 support. A decisive break there will confirm that all upside from 1.7412 is already over. The three-wave structure suggests that this is just a corrective move. In this case, the broader downtrend from 2.0840 may be ready to resume to 1.7412 medium-term low .
GBP/JPY Weekly Outlook
GBP/JPY fell sharply to 153.34 last week but recovered. The initial bias is neutral this week first. But further decline is expected with 155.48 resistance intact. The drop from 158.04 is seen as the third leg of the corrective pattern from 158.19. The breakout of 152.88 will then target the support at 148.94. However, a firm break of 155.48 will dampen this view and return the bias to the upside for the resistance at 158.04 instead.
Overall, price action from 158.19 is seen turning into a consolidation pattern towards an uptrend from 123.94 (2020 low). The decline should be contained by a 38.2% retracement from 123.94 to 158.19 to 145.10 to bring a bounce. The firm break of 158.19 will resume the uptrend towards the long term Fibonacci level at 167.93. However, a sustained breakout of 145.10 will increase the chances of a trend reversal and target a 61.8% retracement at 137.02.
Longer term, as long as the 55-month EMA (now at 147.27) holds, we would still prefer more rally towards a 61.8% retracement from 195.86 to 122.75 at 167.93. But sustained trading below the 55-month EMA will at least neutralize the medium-term uptrend and reopen the possibility of revisiting the 122.75 low (2016 low).