The tension in the Middle East is the major power play in the market today with the focus on Libya and the effects on crude supply. Crude rallied to the upside and gold surged above all striking above $1,400 per ounce.
Clearly the sentiment is pessimistic and the jitters are fueling demand on haven assets and currencies with the dollar, yen and Swiss franc enjoying the strong gains. The tension in the Middle East is seen only intensifying and the geopolitical pressures are increasing! With markets woes unwinding over the situation in Egypt, the oil rich region continues to be rocked with instability with unrest spreading to Yemen, Bahrain, Morocco and Libya.
All eyes are now on Libya with the wave of unrest building in the region. According to reports so far in the six days of unrest at least 300 were killed and Libyan Leader Son Muammar Qaddafi's son said that the country might fall in civil war.
Stocks fell today on China tightening and the geopolitical tension, while the dollar firmed grounds. The dollar index rose to the highest today at 77.77 from the low of 77.51 and hovering at the time around 77.68.
Oil rallied to the upside and so did gold on the tension, as Libya is an oil exporter and further tension might affect the supply in the market. Oil for April settlement rallied to the high of $93.72 per barrel from the lows of $89.80 and currently hovering around $93.12. Gold on the other hand surged to strike the high of $1403.51 from the opening lows of $1389.75 and currently still above $1,400 per ounce.
As for the euro, the common currency was not any lucky despite the good fundamentals today. Rising industry activity in the area alongside German business confidence did not prevent the jitters from surrounding the euro area over the outlook for the debt crisis. The downside weight was after Germany's Merkel suffered a strong defeat in the country's richest state which means Germany might falter on plans to salvage the area from the crisis.
The EURUSD traded in a tight range approaching 1.3715 resistance where it recorded the highest and declined to trade now around the lows recorded at 1.3660 hovering at 1.3671. Only stability above 1.3715 will support the pair to continue to the upside other than that the bearishness might prevail for today.
Volatility is likely to persist today with the focus on the Middle East and the volume is likely to decline further with the US out of the market today celebrating Presidents' Day.