For the past few days, global news have been dominated by events in Ukraine. So far, financial markets responded in a muted way, but that could change following escalation in tensions over the weekend. The most likely markets to become volatile are the energy sector, oil and natural gas, followed by currencies. Late last week, the Ruble and the Hryvna declined in value, but seems very few people actively trade them this fact escaped major coverage. However, the Swiss Franc responded to its safe haven status by making measured gains versus all other majors. If the situation in Ukraine turns into a shooting war, we should expect more appreciation in the CHF and most likely the US Dollar. A lot will depend on what other countries get involved in the conflict and to what extent, but the Yen could become another beneficiary, and the expense of the Euro, the Pound and most emerging currencies. The commodity currencies are as clear-cut, because the CAD, for example, could benefit from rising oil prices and yet decline on general flight to safety trend. Personally, I hope that war can be avoided and we all can concentrate on the normal traders’ headaches, such as policy meetings of central banks. There are several of them on the calendar this week, making it an extremely busy period, even without the increased uncertainty of geopolitical developments.
As always, I will avoid trading fundamental events, sticking to charts. The last one I discussed here was the hourly graph of the GBP-JPY, where a potential trade on the short side was developing. The price remained on its consolidation area, dropping to 169.04, just above my sell order of 169.00. Unless we see a new high, this order is valid. However, the 1H chart became somewhat cumbersome to use at this stage, so I will switch to the 4H chart for future analysis.
It will be interesting to see if the Canadian Dollar continues its strength from Friday. In the USD-CAD, a move below the latest minor low could be a good place to go short, with order at 1.1032. That said, I would wait with placing the order until after the open. If we have increased volatility and this level is penetrated soon after the trading resumes, I do not want to be in it. I simply do not trust initial price moves and will wait until later in the day. Of course, I could miss out on the trade, but that is not the end of the world. Ultimately, my objective for this trade, if it happens, is 90 pips.
As always, possible opening gaps will be of interest to me, since they present good trading opportunities. I think chances for gaps to emerge today are better than in the past several weeks, mainly for reasons mentioned at the top of the page. Have a great trading week!