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Gas Flow Fallout Contained to Regional FX So Far

FOREX
  • Gas flows across eastern Europe have been the focus of trade so far after reports late yesterday that Poland had been cut off from Russian gas supply proved true this morning, with Bulgarian access also being severed as the countries refused to pay RUB for Russian energy exports. The development has prompted an emergency meeting of EU energy ministers, who are set to debate the current sanctions rules that may prompt more nations to drop Russian supply entirely ahead of the next payment deadlines on May 15th.
  • For now, the market response has been contained to regional currencies (PLN holds the bulk of yesterday's sharp losses), with AUD, NZD and SEK mildly firmer this morning, while JPY, EUR trade lower.
  • GBPUSD traded to a fresh cycle low this morning, clearing 1.2974, Apr 13 low, as well as 1.2676 last printed in September 2020. The trend is in technically oversold territory: the 14d RSI is now at 22 - the lowest point since March 2020 and the initial wave of lockdowns that followed COVID.
  • In a reversal of yesterday's outperformance, JPY is the poorest performing currency in G10, helping USD/JPY climb back toward the Y128.00 level. USDJPY remains in an overarching consolidation phase as bulls pause after the recent rally. This sideways activity highlights the formation of a bull flag, reinforcing bullish conditions with the uptrend still intact. The focus on 129.44 next, a Fibonacci projection.
  • US trade balance data and pending home sales numbers for March are the data highlights Wednesday. Central bank speakers include ECB's Lagarde and Bank of Canada's Macklem after the market close.
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