EURUSD down to new lows after very weak German ZEW Sentiment

Market Review

Yesterday’s market was extremely quiet and did not encounter any major moves of note. The session was shaped by a continued rebound in the equity space after last week’s losses as the weekend brought positive developments in Ukraine, Gaza and Iraqi situations. The most “significant” would be the push up in crude between 2 and 3pm London time which took out the strategy stop, though it was minor and quickly retraced back to finish the session mid range. Before this it had come within 5 ticks of the entry and hit first target but we were not fortunate enough to get a fill. The reason for the move was attributed to geo-political risk and the continued situation in Ukraine which we feel perhaps should not continue to effect the price of crude as much as it did yesterday, though on thin volume and lack of news the market got to move and when there is little by way of fundamental developments it will be as good as any. Please do remember that the production and exports of crude oil in the Geo-politically risky areas have not yet been affected.

Today's Fundamental View

This morning news of the German ZEW Sentiment survey saw the lowest number since December 2012, and this has sent the EURUSD back down to new lows for the week relatively aggressively but has since seized its movement and is currently just lingering around the lows for the session. There has been reports that Russia is sending a large convoy of humanitarian help in to Ukraine, though the Red Cross have stated this is not through them and many are currently fearing this is purely a shell cover for deploying military equipment and personal in to the war zone where the Ukrainian army have made good progress in securing. Considering Russia has shelled Ukraine 13 times in the last 24 hours we would be surprised if the only thing Russia sends is humanitarian aid. Comparing this with the Crimea invasion this was not admitted to until it was over and done with, which means we remain extremely alert on this situation as a full scale Russian invasion may yet again change the borders in Europe. The afternoon is otherwise very low on news, with the low impact numbers from NFIB and JOLTS being the only data of slight note. We do believe the equity rally will continue for now, and will have a conservative long recommendation. US Treasuries should sell off amid no actual escalation in Ukraine, and the US will continue to gain ground against the EURUSD, with the potential of a new 12 month low if we breach November 2013 low at 1.3294. We will remain with our short call on crude oil from yesterday, assuming no reports of military equipment of any sort is amongst the convoy that is headed for Ukraine.

Alternative View

Monetary policy comments can adversely affect the markets. Please remain aware of all developments coming out of Ukraine, Russian and the Middle East and keep a conservative outlook with regards to risk. Over exposure in markets with such uncertainty is dangerous and should be avoided.