Two trades to watch: Oil, EUR/USD

Oil sees heightened volatility on Russia-Ukraine fears. EUR/USD extends losses amid risk off trade and ahead of ECB Lagarde.

Energy 3

Oil volatility on Russia-Ukraine fears,  

WTI crude oil prices rose to a new 7-year high as investors digest the increasing likelihood of Russia invading Ukraine.  

After jumping over 3.5% on Friday marking its 8th straight week of gains, oil prices remain elevated at the start of the week, although the price has come off highs as invasion fears ebb slightly. 

Ukraine is a key transit hub for Russian oil & gas. An invasion could disrupt supply. US/EU sanctions on Russian oil could also hit supply in an already tight market.  

Other OPEC countries would struggle to pick up the slack given that they have already missed output quotas for the past two months. 

Russia continues insist that it is not planning an invasion, but this has failed to calm the markets. Investors will continue monitoring developments. An invasion could quickly send oil to $100. 

Where next for WTI crude oil? 

Crude oil trades in an ascending channel dating back to mid-December last year. The price rose to a 7 year high of 93.82 and is easing lower, falling below support 92.50, which is bringing the RSI out of overbought territory. 

Any moves lower could be considered buy the dip opportunities. It would take a fall below 88.20 for the bias to change to bearish and sellers take control. 

On the upside, resistance can be seen at 93.80 today’s high and 94.00. 

EUR/USD falls in risk off trade, ahead of ECB's Lagarde

EUR/USD is falling, extending losses from the previous session on Russia – Ukraine invasion fears, although the selloff appears to have steadied around 1.1350. 

Russia is Europe’s fifth largest trading partner, so any sanctions on Russia could impact Europe. Meanwhile the USD benefits from safe haven gains. 

In addition to risk sentiment, central bank divergence is likely to be under the spotlight. Last week sky high inflation drove expectations of a more hawkish Fed. Meanwhile, the ECB cooled hawkish expectations. 

Today ECB Christine Lagarde is due to speak. 

Where next for EUR/USD? 

EURUSD reached a monthly high of 1.1490 and rebounded lower, falling below its 100 sma and its 50 sma and is testing support from its rising trendline since November 24. 

The receding bullish bias on the MACD suggests that there could be more downside to come.  

Support can be seen at 1.1266 the February 3 low, ahead of 1.1220 the February low and a level which has offered support several times across December. 

Meanwhile bulls could look for a move back over the 50 sma at 1.3330 and 1.1385 the December. 



 

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