Market Recap
The week started off on the wrong foot for traders as tensions in Ukraine saw risk-on markets drop aggressively across the board. The S&P 500 recorded its steepest decline in a month on Monday and the Russian Ruble tumbled as President Putin deployed military forces to the Ukraine peninsula of Crimea.
However, carefully worded statements from Putin restored calm to markets and by Wednesday, US equities had more than reversed Monday’s drop, with the S&P 500 hitting another record high by the close of play. It now seems that Crimea will be handed back to Russia, in a somewhat peaceful manner, although citizens will need to partake in a separatist vote next weekend and traders will still be keeping an eye on developments.
Later on in the week, we saw the ECB keep interest rates on hold in their monthly policy meeting on Wednesday. That surprised traders and saw the EUR/USD spike higher by around 150 pips while the BOE also stayed unchanged.
The week rounded up with US non-farm payrolls for February and the headline number came in stronger than expected. US employers added 175,000 jobs in February, against the 149,000 expected, and ended speculation that the winter weather would disrupt the labor market for a third month in succession. Meanwhile, the underlying unemployment rate ticked up to 6.7% as more people joined the workforce.
Week Ahead
Traders will be acutely aware of the situation in Ukraine this week even though tensions seem to have calmed. Any escalation would almost certainly lead to a repeat of Monday’s volatility and see traders head for safe haven assets. However, as mentioned above, the possibility of conflict has waned and traders may well turn to other matters.
The economic calendar is fairly quiet for US traders and US retail sales will be the main item on the agenda on Thursday before University of Michigan confidence report on Friday.
Traders will also be watching the Reserve Bank of New Zealand’s policy meeting on Wednesday and Australian unemployment on Thursday.
Our signals got off to a slow start this week and were affected by the volatility caused by events in Eastern Europe. We did manage to make 169 pips in the AUD/USD, but gave back pips in EURUSD, Dax and gold. Fortunately, March has only just begun so we still have plenty of time to register another good month of results.
NZD/USD Outlook
The NZD/USD has been in a strong upward trend over the last few weeks, and the currency hit a high of 0.8524 on Thursday before dropping back on Friday when non-farm payrolls were released.
Looking ahead, analysts are expecting the RBNZ to raise rates on Wednesday by a quarter percent, taking the rate from 2.5% to 2.75%. As a result, NZD/USD should hold steady running up to the event and should move past 0.85 once more.
However, traders may find more value in shorting NZD/USD (with a tight stop) as the RBNZ decision is made. With the global economy still fragile, there is a decent enough chance that NZ bankers will wait another month before raising rates and that will send the kiwi lower. On a risk/ reward basis this is probably the better option for forex traders.
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