Russia entered first major foreign debt default

28 June 2022, 01:41

Market Focus

US shares edged lower to start the week following a major rebound last Friday. The Dow Jones Industrial Average dropped 0.2%, to 31,438.26, the Nasdaq Composite declined 0.7%, while the S&P 500 fell 0.3%. US stocks struggled to turn upside on Monday as investors weighed whether the bottom has been reached and stocks have been oversold in this bear market.

Russia has entered its first major foreign debt default as the payment period expired. Interest payments of $100 million that Russia needed to pay were due on May 27 with the grace period on June 26. However, several bondholders have indicated that they have not received the payments after Russia’s attempts to pay in rublex, which is blocked by international sanctions. The next test would be  a further $2 billion in payments due before the end of the year. If Russia continues to default, it would effectively ostracize itself from the global financial system. However Russia has managed to find ways to get payments to bondholders so far.

Main Pairs Movement

AUD/USD edged 0.31% lower on Monday. The Aussie traded in a  tight range in the absence of domestic data this week other than Retail Sales. At the end of the day, AUD/USD finished at 0.69213.

Gold turned downside after attempting to sustain above the resistance level of $1,840. Mixed US economic data undermined market sentiment, bringing gold down to $1,822.75. The US Durable Goods Orders were better than expected and up 0.7%. In the meantime, Pending Home Sales dropped 13.6 YoY.

EUR/USD advanced 0.24% to 1.05820. The ECB will host the Forum on central banking in Portugal this week. ECB President Christine Lagarde will make the speech during the commencement.

GBP/USD consolidated, dropping 0.06% on Monday as there were no major economic events. UK parliament members will vote on legislation that will possibly allow members to amend or rewrite Brexit deals.

WTI oil price was up 2.39% on Monday, advancing two- consecutive days. Oil prices turned upside as OPEC+ decided to cut the 2022 market surplus from 1.4 million to 1 million BPD. Moreover, due to the political turmoil in Libya, crude oil output will shrink approximately 600K BPD in the oil market.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD edged higher on the first trading day of the week. The US Greenback witnessed broad based weakness as mixed data from the US came in and market participants remained worried over a slowing US economy. US pending home sales decreased by a staggering 13.6%, year over year, for the month of May. On the economic docket, US GDP is set to release on the 29th, while EU CPI is scheduled to be released on July 1st.

On the technical side, EURUSD has traded above our previously estimated resistance level of 1.05754, but upward momentum seems to be fading. The next level of resistance sits at around the 1.06315 price region. RSI for the pair sits at 50.33, as of writing. On the four hour chart, EURUSD is currently trading near its 50 day SMA and below its 100 and 200-day SMAs.

Resistance:  1.05754, 1.06315

Support: 1.0493

GBPUSD (4-Hour Chart)

GBPUSD traded mostly sideways over the course of the first trading day of the week. Brexit continues to weigh on the British economy as members of parliament will vote on legislation that would allow ministers to rewrite parts of the post-Brexit deal and remove checks on goods entering Northern Ireland from the rest of the UK. Market sentiment continues to put the British Pound and the US Greenback in contention as the safe haven currency of choice as global economies show signs of recession.

On the technical side, GBPUSD continues to trade below our previously estimated resistance level of 1.2381. Support level at 1.2173 remains firm. RSI for Cable sits at 44.31, as of writing. On the four hour chart, GBPUSD is currently trading below its 50, 100, and 200-day SMAs.

Resistance: 1.2381

Support: 1.2173, 1.20824

USDJPY (4-Hour Chart)

USDJPY built on last Friday’s upward momentum and continued to trade higher over the course of Monday’s trading. Despite a broad based weakness of the US Greenback, the Japanese yen continues to experience strong selling. An export reliant country, Japan continues on its course of a supportive monetary environment to keep exchange rates low. The benchmark US 10-year Treasury yield has resumed trading above 3.2%.

On the technical side, USDJPY has rebounded strongly from our previously estimated support level of 134.6. Resistance at 136.57 remains close by and could be challenged. RSI for the pair has climbed to 62.63, as of writing. On the four hour chart, USDJPY is currently trading above its 50, 100, and 200-day SMAs.

Resistance: 136.57

Support: 134.6