As we learned in the Invest Diva education program, the forex market is subject to volatility on international tensions. CNN’s Fear and Greed Index, which also measures risk appetite, has plunged into levels reflecting fear after indicating extreme greed a month earlier.
1. Malaysia Airlines plane crash in Ukraine
A Malaysian Airlines commercial plane was reportedly shot down by a missile somewhere around the Ukraine-Russia border. Bear in mind that the conflict between Russia and Ukraine has been going around since February and hasn’t shown signs of subsiding over the past few months.
Investigators described the explosive device as a Russian-made antiaircraft missile, although Russian officials have denied any involvement. Meanwhile, Ukraine accused pro-Russia separatists at the border for striking MH17 in what it referred to as a terrorist attack. A few days back, separatists have bragged about shooting down at least three Ukrainian military planes flying near the border.
On this news, equities and higher-yielding currencies such as Mr. Euro sold off and moved down on the forex dance floor. The unfolding of investigations could continue to have a significant on risk sentiment in the coming days.
2. Israel ground operation in Gaza
In another side of the world, another dangerous conflict is going on between Israel and Palestine. Although both countries have been at odds since the 50s, tensions flared last month when three Israeli teenagers were killed in the Palestinian-occupied West Bank, followed by the death of a Palestine teen a few days after.
Hamas, a Palestinian Islamist political organization and militant group, has been at the heart of this conflict, as it has conducted a number of attacks on Israel since its establishment in 1987, bombarding the country with several assault rockets from the Gaza Strip recently. Yesterday, Israel declared that it is launching a ground offensive in Gaza to target tunnels used by militants to initiate attacks.
The volatility index (VIX), which is widely considered to gauge market fear, jumped 37% to reach its highest level since April when the announcement was made. Bear in mind that Israel has already been launching airstrikes for days and their decision to send in the troops could be a signal that the conflict is just about to worsen.
3. U.S. and Russia exchange new round of sanctions
The heated exchange between U.S. and Russia is taking the backseat among the tensions that have resulted to several civilian casualties in the past few days. Remember that the Euro zone and the U.S. government stepped in to impose sanctions on Russia’s last March? That put restrictions on Russian companies in the energy, mining, financial services, and defense sectors.
This week, the U.S. broke out another round of sanctions on Russia’s energy and banking companies in its attempt to keep Putin from supporting Ukranian pro-Russia separatists. The Russian government has denied any involvement in stoking the tension in the border, although Putin has threatened to respond with “painful” countermeasures.
Retaliation from Russia could have serious effects on the global economy and market sentiment. On the line is Russia’s support for the U.S. government’s efforts to talk Iran out of its nuclear program, as the Russian Foreign Ministry issued a statement saying “Such behavior of the Obama administration also inevitably affects the possibilities of our cooperation in many other areas.”
While the cliché “bad things come in threes” seems to apply in this situation, it is a very rare and unprecedented occurrence to have several geopolitical tensions affecting market sentiment. Long term traders. Don’t sweat the small losses and look at the big picture. Short term traders, invest responsibly. And wait, are we hooked up on the social media? To get the most recent intraday updates, don’t forget to follow Invest Diva on Twitter and Facebook.
Intraday Forex Technical Levels
EUR/USD Intraday: consolidation in place.
Invest Diva likes: Short positions below 1.354 with targets @ 1.351 & 1.3475 in extension.
If pair goes nuts: Above 1.354 look for further upside with 1.3575 & 1.362 as targets.
What’s up on the forex dance floor: As long as the resistance at 1.354 is not surpassed, the risk of the break below 1.351 remains high. The RSI is pressured by a strong resistance area.
Supports and resistances:
1.362
1.3575
1.354
1.353 Last
1.351
1.3475
1.345
GBP/USD Intraday: the downside prevails.
Invest Diva likes: Short positions below 1.7115 with targets @ 1.708 & 1.7055 in extension.
If pair goes nuts: Above 1.7115 look for further upside with 1.715 & 1.718 as targets.
What’s up on the forex dance floor: As long as 1.7115 is resistance, look for choppy price action with a bearish bias.
Supports and resistances:
1.718
1.715
1.7115
1.7093 Last
1.708
1.7055
1.7
USD/JPY Intraday: key resistance at 101.6.
Invest Diva likes: Short positions below 101.6 with targets @ 101.05 & 100.85 in extension.
If pair goes nuts: Above 101.6 look for further upside with 101.8 & 102.05 as targets.
What’s up on the forex dance floor: Even though a continuation of the technical rebound cannot be ruled out, its extent should be limited. The 101.6 former support is now acting as a resistance (polarity principle) and maintains a bearish bias.
Supports and resistances:
102.05
101.8
101.6
101.365 Last
101.05
100.85
100.5
USD/CHF Intraday: bullish bias above 0.8965.
Invest Diva likes: Long positions above 0.8965 with targets @ 0.9 & 0.9015 in extension.
If pair goes nuts: Below 0.8965 look for further downside with 0.8935 & 0.891 as targets.
What’s up on the forex dance floor: A support base at 0.8965 has formed and has allowed for a temporary stabilisation.
Supports and resistances:
0.904
0.9015
0.9
0.8975 Last
0.8965
0.8935
0.891
NZD/USD Intraday: capped by a negative trend line.
Invest Diva likes: Short positions below 0.8705 with targets @ 0.8635 & 0.86 in extension.
If pair goes nuts: Above 0.8705 look for further upside with 0.8745 & 0.8785 as targets.
What’s up on the forex dance floor: The RSI is mixed with a bearish bias.
Supports and resistances:
0.8785
0.8745
0.8705
0.8676 Last
0.8635
0.86
0.8575
AUD/USD Intraday: the downside prevails.
Invest Diva likes: Short positions below 0.941 with targets @ 0.9325 & 0.929 in extension.
If pair goes nuts: Above 0.941 look for further upside with 0.9455 & 0.9485 as targets.
What’s up on the forex dance floor: As long as 0.941 is resistance, look for choppy price action with a bearish bias.
Supports and resistances:
0.9485
0.9455
0.941
0.9388 Last
0.9325
0.929
0.9255
USD/CAD Intraday: the bias remains bullish.
Invest Diva likes: Long positions above 1.0695 with targets @ 1.0825 & 1.0855 in extension.
If pair goes nuts: Below 1.0695 look for further downside with 1.0655 & 1.0625 as targets.
What’s up on the forex dance floor: Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.
Supports and resistances:
1.0905
1.0855
1.0825
1.0745 Last
1.0695
1.0655
1.0625
US Index Levels
S&P500
Short @ 1954 with targets @ 1942 & 1937 in extension.
Alternative scenario: Above 1978 look for further upside with 1984 & 1986 as targets.
Dow Jones
Short @ 16931 with targets @ 16785 & 16725 in extension.
Alternative scenario: Above 17110 look for further upside with 17160 & 17215 as targets.
Nasdaq 100
Short @ 3879 with targets @ 3832 & 3808 in extension.
Alternative scenario: Above 3942 look for further upside with 3961 & 3981 as targets.
Russell 2000
Short positions below 1159 with targets @ 1112 & 1103 in extension.
Alternative scenario: Above 1159 look for further upside with 1176 & 1194 as targets.
