Free Profitable Forex Newsletter
Hey! This is Philip with this week’s edition of the Free Profitable Forex Newsletter!
The war in Ukraine and impact on markets
Fear rocked the markets yesterday following news that Russia had attacked Ukraine early on Thursday morning. Risky assets and risk-related currencies suffered while safe-havens (gold, USD, JPY) and Russia-linked commodities (oil, gas) surged higher. The EUR currency and Eastern European currencies were also hit hard due to their geographic proximity to the conflict zone and economic
linkages with Russia.
In light of this, we are taking the opportunity of this week's newsletter to break down the recent developments in Ukraine and their impact on markets.
Many traders are wondering and have asked us, what is the best way to trade war?
The short answer: DON'T!
Yesterday's action in the markets best explains why:
Gold, the ultimate safe-haven, rallied to as high as 1973, before tumbling lower to end the day in the red near the 1900 level.
At about the same time, stocks U-turned and reversed all the losses from the deep sell-off induced by the Russian attack. The S&P 500 and the NASDAQ ended the day positive.
Many traders were left puzzled by the moves. So, let's try to decompose what the heck is going on.
The first part of the moves (the risk aversion) was obviously driven by multiple different fears regarding world peace and the global economy. First, will NATO react and enter a war with Russia? And second, will US and EU sanctions be severe to the point of damaging their own economies and the global economy in general? Investors fled to safety in the face of these
uncertainties.
However, later in the day, it became clear that none of the severe scenarios for the world were likely to materialize. We can summarize it like this:
- Sanctions announced by the west are perceived by investors as rather weak.
- A ban on Russia from the SWIFT payment system was not announced, and it seems several EU countries opposed the idea. The SWIFT ban option is considered the most potent of sanctions and would do the most damage to Russia.
- US President Joe Biden and NATO's Stoltenberg reaffirmed, "we are not sending our army, our troops won't fight in Ukraine."
Guess what. The markets are reading this to mean that it will be a short war, resulting in a change of the Ukrainian Government. In essence, meaning that Ukraine would become a pro-Russian state. The worst sanctions are likely to be avoided, and therefore, the worst
economic effects on the world will be avoided. And more importantly, direct NATO-Russia war is avoided as both Biden and Stoltenberg confirm they have no intention of fighting in Ukraine.
This is how the situation stands at the moment, or at least how the markets are reading it. Hence, investors are ready to take on risks again.
With that said, the situation remains highly uncertain. Things could still go either way and, unfortunately, can escalate further. Let's hope that doesn't happen.
Let's pray for peace in Ukraine.
Trade signals from the past weeks
- January 26, 2022 – Long USDCAD from 1.26, currently around +190 pips; stop adjusted higher to around 1.27, upside target remains toward 1.30 area (open & in progress; trade idea sent on Jan 21)
- February 18, 2022 - Short NZDUSD from 0.6700, stop taken at 0.6735, - 35 pips
TOTAL: -35 pips in the past week
TOTAL: +5120 pips profit since October 1, 2018
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High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of
or reliance on such information.
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