EUR/USD has fallen to a new low for the year at 1.1099.
“Traders are increasingly hedging against declines in the euro as they prepare for the damage the war in Ukraine could wreak on the European economy,” a Bloomberg article read today.
The move is an extension of the weekly build on the short side and probably has a lot more to go from a technical perspective:
EUR/USD weekly chart
The Ukraine crisis is heating up with defense intelligence saying there are around 300 Belarusian tanks near the Belarusian-Ukrainian border.
There are news reports that Russia is preparing a deliberate provocation to justify the entry of Belarusian troops into the conflict.
Europe remains highly exposed to Russia in some sectors, notably energy,” analysts at TD Securities explained. “As the West rushes to sanction Russia, Europe is likely to feel the heaviest blow. This poses a typical stagflationary shock, and growth is likely to be lower and inflation higher than otherwise.”
Meanwhile, the US dollar is holding firm as the crisis in Ukraine continues with the DXY index rising for the second day in a row and now trading well above 97. The high has been 97.50 so far. After that, the levels to watch are the June 2020 high near 97.802 and the May 25, 2020 high near 99.975.
This could leave the euro exposed to 1.0855 or even a test of 1.08, according to the weekly chart above. A canary in the mine is in the fall in European banks this Tuesday. Traders have sharply lowered their expectations of monetary tightening by the European Central Bank. German yields have fallen into negative territory, down dramatically by 25 basis points.
Source: Fx Street
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