Light sanctions on Russia, risk assets rally

Four markets in focus today: Spot Gold, AUD/NZD, AUD/USD and Italy 40 cash.

Spot Gold

With the EU imposing perhaps the lightest sanctions possible on Russia, we’ve seen a fair bit of profit-taking from those who bought safe-haven assets as a hedge against a major fallout from the Crimea referendum. In terms of price action, gold printed a bearish reversal at the trend high, so this could mark a turning point. The key upside target would still be the $1415 level and clearly the situation between Russia and the Ukraine is still very much in play. It’s hard to see gold falling too far with this in mind.

AUD/NZD

This pair could squeeze higher in the next couple of weeks and I would be looking for a test of the October downtrend at 1.0731. There is clear multi-year support around 1.05, and on the topside a break of 1.0673 would put the downtrend in play. At 11:30 AEDT today we get the RBA minutes and the market will be keen to explore if the bank gives any reason for incorporating the line that the ‘exchange rate is high by historical standards’ in the recent policy statement. Westpac’s call that they see no rate cuts this year has certainly helped put support in the AUD.

AUD/USD

After pulling back below the 90 handle the AUD/USD is once again testing the top end of the range it has been in for the year. There was a failed break of this ceiling on March 6, where the pair closed above the range, but then we subsequently saw the pair trade down to 0.8924. Price action would favour another test of the top side, although we will have to see if there is any further narrative from the RBA today around the AUD, while China seems to have taken the widening of CNY trading band as a positive. In terms of resistance, I will be watching the March 7 high of 0.9133 and then the 200-day moving average at 0.9151.

Italy 40 cash

After testing the 21,000 level on at least three occasions this year, the index is looking ominously poised to test it once more. In terms of pure momentum and trend, there is no better developed market to be leveraged too right now.

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