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Forex Pairs

• No relief for the euro to begin the new trading week
• EUR/USD is currently trading down 0.9 percent to 1.0830, and there doesn’t appear to be much relief for the single currency in general at the moment. Sure, the SNB may have intervened verbally, which has helped EUR/CHF erase earlier losses and turn flat at 1.0020, but it isn’t much.
• The euro’s woes continue, and the technical outlook is rather bleak.
• Looking elsewhere, the dumping of EUR/USD, as well as the overall risk aversion flows, are both keeping the dollar bid. The USD/JPY has risen 0.2 percent to 115.06, while Treasury yields have recovered slightly on the day. 10-year yields are now up 2 basis points to 1.74 percent.
• Stocks, on the other hand, are continuing to fall, with European indices set for another bad day following last week’s plunge. The DAX has dropped another 3.6 percent, signalling the start of a bear market (drop of 20 percent from its January closing high).
• Despite their reputation as risk currencies, the Australian and New Zealand currencies continue to outperform.
• For the most part, the Russia-Ukraine situation is one of the most important factors in keeping the currencies afloat. However, with skyrocketing energy prices, there will undoubtedly be economic spillovers in some form or another.
• The AUD/USD is trading up 0.4 percent near 0.7400, but is still off earlier highs of 0.7440.
• In the meantime, the NZD/USD is up 0.2 percent to 0.6875, but this is off earlier highs of 0.6925, as it approaches a test of its own 200-day moving average at 0.6929.

Europe

• The DAX is down 20% since January’s closing record high.
• Eurostoxx -1.9 percent, Germany’s equities hammered lower at the open, DAX on course for bear market signal, Germany’s DAX fell 3.7 percent, France’s CAC 40 fell 2.4 percent, the United Kingdom’s FTSE fell 0.8 percent and Spain’s IBEX fell 2.3 percent.
• It’s an ugly start to the new week, and given the risks surrounding the Russia-Ukraine situation, it’s unlikely to provide much relief to investors on the day. Commodity prices are surging, and funding concerns are resurfacing as the fallout from Russia sanctions bites back at Europe. Oh my goodness.
• For the first time since late March 2021, the CAC 40 index has fallen below 6,000.
• US futures are also down, with the S&P 500 down 1.4 percent, the Nasdaq down 1.8 percent, and the Dow down 1.2 percent.

Russia-Ukraine

Today’s talks between Russia and Ukraine are scheduled to begin at 1200 GMT. The first two rounds of talks failed to produce a breakthrough, and there is no reason to believe that this time will be any different. All of this is mostly for show, as the situation on the ground remains unchanged.

Japan

The downgrade would be attributed to the recent spike in omicron infections, which appeared to have dealt a bigger-than-expected blow to consumption activity at the BOJ’s policy meeting next week. The central bank is also expected to warn of rising economic risks linked to the Russia-Ukraine conflict, which has caused energy prices to skyrocket. As a result, according to sources, the BOJ will consider providing a bleaker assessment of the economy and consumption than the previous assessment in January, i.e. the economy “showing clearer signs of a pick-up.”