FX.co ★ Russo-Ukrainian conflict, day 26

Major US stock market indices such as DOW Jones, NASDAQ and S&P 500 closed Friday with another strong gain. In total US stock indices have been rising for four days in a row. All this movement now looks like a retracement against a downward retracement. To be honest, it is very difficult to say why the US stock market is rising now. We have wondered more than once why the US currency fell after the Fed raised rates for the first time in three years. This may have been because the markets took this tightening into account long before the Fed's decision. If so, there could indeed be a reversal in all Fed-linked instruments for some time. However, from a longer-term perspective, all of the riskiest instruments are likely to resume their decline. After all, the Fed has announced six more rate hikes this year. With such a strong monetary policy tightening plan, a new bullish trend is unlikely. Therefore, we regard the current movements in the US stock market as a retracement.

Meanwhile, the Russo-Ukrainian conflict is weakening. The fighting is not diminishing in intensity. This means that no progress is being made by the Russian army and that Ukrainian forces are preparing to launch a counter-offensive. The phrase "failure of the military operation" is heard more and more often in the media. Ukraine continues to hold off the Russian offensive thanks to financial and military aid from the West, as well as the Ukrainian army. Thus, there is no indication that a ceasefire agreement can be signed any time soon. According to Kiev officials, negotiations with Moscow may resume on March 21. Both delegations have realised that it is inconvenient and dangerous to travel to Belarus for every round of talks. That is why the negotiations are now taking place by video link. Well, we just have to wait for the results of these negotiations. However, as most neutral experts say, the talks are a cover-up and no one is really aiming for an agreement on an armistice. This is simply not possible, as Kiev wants to fully restore its territorial integrity, while Moscow has no intention of returning Crimea and Donbass. That is why we believe that this conflict will drag on for at least a few months and even this forecast now looks very optimistic. If so, the US stock indices could resume their fall after an upward retracement, as the vast majority of experts believe. Six rate hikes and a full-scale military conflict in the centre of Europe, which could lead to a food crisis across Europe, will make traders and investors reluctant to take risks.