Winds of war are blowing, where to direct investments?

This time it seems Putin is serious, the US administration has asked its citizens to leave Ukraine within 48 hours. What are the investment opportunities right now?

Does Russia intend to go through with it?

This time it seems that Putin is serious, the US administration has asked its citizens to leave Ukraine within 48 hours, the risk of an imminent invasion by Russia is real. Voices, obviously not confirmed, would have already set the start of operations for Wednesday, so before the end of the Winter Olympics in China on February 20. The US will move another 3,000 troops to Poland, France to Romania.

The coup is an alternative

According to NATO Secretary-General Jens Stoltenberg, there is also the risk of coup risk in Ukraine, Moscow could indeed attempt to overthrow the Kyiv government without actually going to war. Biden said, “When Americans and Russians start shooting each other it is world war”. The invitation to American citizens to leave Ukraine is due to the fact that being the Russian one of the largest armies in the world, “things could precipitate fast”. In the end, Putin’s aim is not so much to conquer Ukraine but to force it to evaluate a new course and persuade it to change alliances, without looking at the West anymore.

Markets prepare for the invasion

Meanwhile, the markets are preparing for the hypothesis of invasion. A clear signal in this sense came from the trend in US ten-year bond yields which fell on Friday to 1.923% from 2.036% in the first part of the session.

Yields rose during the week on fears of Fed rate hikes following Thursday’s dire inflation reading (+ 7.5% in January, the largest rise since 1982), but as the probability of an outbreak of a real war investors threw themselves on safe-haven assets, in particular US Treasuries, consequently also the dollar but also gold.

In the event of an invasion, the price of gas would probably also rise with direct consequences also on oil prices.

The bullish figure for the US T-Note

On the 10-year T-Note chart a “tweezer bottom” (a “tweezer top” on the yield chart, the two are in fact the opposite of the other) appeared, drawn across the base of the bearish channel drawn by the top of September 2020. The bullish figure would be completed above the 126.80 area, in which case a return to at least 128.50 is expected.

In short, if for a few days it seemed inevitable the continuation of the fall in the T-Note prices, and therefore of the rise in yields (with a target of at least 2.25%), now an opposite scenario is being drawn, which could hold up until to which winds of war will blow.

Buying US bonds is therefore a possible strategy as long as you hedge with a stop below 125.50.

The dollar, a classic safe haven asset

For the European investor, the purchase of dollar-denominated assets, not only bonds but also gold and oil, could have the double advantage that the dollar, a classic safe-haven currency, could also appreciate. Among other things, the dollar was already tending to strengthen precisely by virtue of the expectations of a rise in US rates.

The highs of the eurodollar on Thursday at around 1.15 coincide with those of January 14, a resistance that has held up by pushing the prices down. S.eight 1.1250 the trend in favor of the dollar could be considered to have resumed with objectives up to 1.10 and intermediate support at 1.11.

The hour overcomes a strong resistance

Gold sent a strong signal of strength on Friday, crossing the line that joins the highs of early June and mid-November 2021, passing to 1855 dollars. This line can be seen as the high side of the bullish triangle drawn by the June high, a figure that projects targets in the area of ​​around $ 2080, thus aligned with the highs of August 2020 at $ 2075. Intermediate resistance at 1950/60.

Only descents below the 1840 area would signal the return of the bullish signal return probably due to the decrease in the risks of an invasion of Ukraine.

Oil at $ 115?

Finally, even oil on Friday, after a few sessions of uncertainty, has resumed a decisive rise, and even in this case, the rise could continue as long as the risk of a low or high-intensity war remains high. The future on the WTI left behind in the 90 dollar area the 61.8% retracement of the downside from the top of 2008. As long as prices remain above the $ 89/90 area, the target will be positioned on the next level of the Fibonacci retracements, that of 78.6%, located at around $ 115.