European Open: USD/JPY holds key support ahead of NFP

Asian equity markets remain in the red after initial reports of a fire at a nuclear power plant in Ukraine sent investors hiding for cover. Rescue teams have since arrived to control the fire and prices have stabilised, although sentiment now sits on a knife edge. Interestingly, it was only yesterday that French President Macron warned that “the worst is yet to come” following his call with Putin.

The events overnight prompted a call between President Biden and President Zelenskiy, both calling for Russia to cease military action in the area to allow emergency services to be at the site. Whilst Russian forces initially prevented emergency services from accessing the site, it has now been confirmed they’re now able to extinguish the fire.

Futures markets point to a weak open

A major theme to track heading into the weekend is how European leaders respond and if the situation deteriorates further or, with any luck, take a turn for the better. With futures markets pointing lower ahead of the open the FTSE is currently expected to open below its 200-day eMA. S&P 500 E-mini futures are back above 4300 yet a bearish hammer formed below the 200day eMA, hinting at a swing high. The DAX is poised to open beneath the Feb 3^rd low.

FTSE 350: Market Internals

FTSE 350: 4052.28 (-2.57%) 03 March 2022

18 (5.13%) stocks advanced and 332 (94.59%) declined
7 stocks rose to a new 52-week high, 56 fell to new lows
21.08% of stocks closed above their 200-day average
12.54% of stocks closed above their 50-day average
14.25% of stocks closed above their 20-day average

Outperformers:

+ 12.39% - Coats Group PLC (COA.L)
+ 11.20% - Darktrace PLC (DARK.L)
+ 9.64% - London Stock Exchange Group PLC (LSEG.L)

Underperformers:

-42.13% - Polymetal International PLC (POLYP.L)
-27.50% - ITV PLC (ITV.L)
-14.13% - Admiral Group PLC (ADML.L)

AUD continues to defy risk-off flows

Another spike in commodity prices helped AUD and NZD escape the usual sell-off associated with bouts of risk-off. AUD/JPY has risen to a 17-week high and EUR/AUD trades beneath 1.50 for the first time since October 2017. Should tensions not escalate further then traders may be able to focus on today’s NFP report, even if Powell’s effective confirmation of a 25 bps hike had already upstaged it somewhat.

USD/JPY is trading effectively flat for the day, although a large bullish hammer shows there is demand around 115.23, where the weekly pivot point resides. Should NFP outperform expectations and geopolitical tensions somehow reside, perhaps it can break back above 115.50. Yet should sentiment turn south a break below 115.20 suggests its next leg lower is underway.

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