GER30 Rebounds on Improved Sentiment

  • GER30
    (${instrument.percentChange}%)

US Ban on Russian Energy

US President Biden announced an embargo on Russian oil, gas and energy yesterday, further escalating sanctions against the country, for invading Ukraine. Mr Biden said that this move, "is targeting the main artery of Russia's economy", but warned that there would be "costs" for the US as well.[1]

Although the US acted alone on this, the US President noted that the decision was made "in close consultation with our Allies and our partners around the world, particularly in Europe" and expressed his understanding for the fact that Europe may not be able to join the ban.

The United States do not depend on energy imports from Russia, the way Europe is, giving more freedom to President Biden to pull the trigger on the ban.

European Action

Europe has been hesitant to sanction Russian oil and gas, since 25% of its oil imports and 45% of its gas imports come from Russia.

On Monday, German Chancellor Olaf Scholz had pushed back against an energy embargo, based on a statement reported by Politico [2]. Last month however, Germany had halted the Nord Stream 2 pipeline [3], which had been designed to transport gas from Russia to Germany and Europe, across the Baltic Sea.

The European Commission did not stand still and unveiled a plan yesterday, to minimize its reliance, which can reduce EU demand for Russian gas by two thirds before the end of the year.[4]

The United Kingdom also took action and decided to phase out the import of Russian oil during the course of the year, which makes up for less than 4% of the country's supply.[5]

GER30

As Europe refrained from an outright ban on Russian energy imports, sentiment shows improvement today, also helped by news that Foreign Ministers of Russia and Ukraine are expected to meet tomorrow, as per the Russian news Agency TASS.[6]

This allows GER30 to extend yesterday's rebound, with gains in excess of 2% at the time of writing. It tests the 23.8% Fibonacci of the January-March drop, which give it the opportunity to push for the 38.2% level at 13,902. At this stage though, we are cautious for a larger recovery, towards the EMA200 (at around 14,600), as the upside contains many roadblocks.

Despite the upbeat mood, the week had started with a plunge to the lowest levels since November 2020 (12,245) and the index is still vulnerable to fresh selling pressure. Renewed risk aversion though, will likely be required for fresh lows that could bring 11,519 in the spotlight.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 09 Mar 2022 https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/03/08/remarks-by-president-biden-announcing-u-s-ban-on-imports-of-russian-oil-liquefied-natural-gas-and-coal/

2

Retrieved 09 Mar 2022 https://www.politico.eu/article/germany-rejects-calls-for-banning-russian-oil-and-gas/

3

Retrieved 09 Mar 2022 https://www.deutschland.de/en/news/scholz-halts-nord-stream-2

4

Retrieved 09 Mar 2022 https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1511

5

Retrieved 09 Mar 2022 https://www.gov.uk/government/news/uk-to-phase-out-russian-oil-imports

6

Retrieved 25 Jun 2022 https://tass.com/politics/1418847

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