- EUR/USD rallied amid a slight improvement in market sentiment.
- The EU, US, UK and Canada imposed another tranche of sanctions, sparking a risk-off sentiment in the market amid the escalating conflict.
- Inflation figures for Spain were reported, with the IPCA expanding 7.5% y/y above the 6.8% estimate.
- EUR/USD remains biased to the downside and could test the yearly low at 1.1106 as the Ukraine-Russia war fails to de-escalate.
On Monday, the single currency started the week with a gap from Friday’s close at 1.1273, to open at 1.1122, due to the harsh sanctions imposed on Russia, by the US, the Eurozone, the UK and Canada. , among other countries. The reaction of market participants increased the demand for haven assets. In the forex space, the USD, JPY and CHF all witnessed ebbs into them, while the EUR started off on the wrong foot, although recent developments have pushed the pair higher. At the time of publication, the EUR/USD it trades at 1.1224.
Ukraine – Russia war update
Over the weekend, the EU, US, UK and Canada agreed to “prevent the Russian central bank from deploying its international reserves in a way that would undermine the impact of our sanctions,” according to The Guardian. The goal is to cripple Russian assets. In addition, the US imposed sanctions on Russia’s top 10 financial institutions while freezing the assets of the Russian president and Russian ministers. Furthermore, a dozen Russian oligarchs with links to Putin witnessed the same thing along with a travel ban.
Meanwhile, the Eurozone economic calendar presented inflation figures for Spain. Spain’s HICP in February rose 7.5% yoy above the 6.8% estimate, while the inflation rate reached 7.4% yoy, up from 6.1% in January.
A recent ECB speech talked about downside risks to eurozone growth from the Ukraine crisis, but the clear upside inflation risks have not even begun to be fully felt. The ECB meeting in March would be interesting. Analysts at Brown Brothers Harriman said they “wait for the bank to confirm that the PEPP will end as scheduled, we think Lagarde and the company will try to keep as much optionality as possible to see how the situation develops.”
Meanwhile, Fed members Bullard and Waller maintained their aggressive stances, in favor of a 50bp move.
The US economic calendar presented the trade balance for goods in January, which recorded a deficit of 107.63 billion dollars compared to the 100.47 billion dollars estimated. At the same time, the Chicago and Dallas Fed manufacturing indices for February came in better than expected at 56.3 and 14, respectively.
EUR/USD Price Forecast: Technical Outlook
The EUR/USD daily chart shows that the pair is biased lower. Why? The daily moving averages (DMAs) are above the spot price, pointing lower, indicating that the downtrend could accelerate in the short term. However, the gap to the downside on Monday increased the buying pressure on the pair, but as long as the war between Ukraine and Russia does not stop, the EUR/USD would be subject to market mood swings unless a break is reached. peace agreement.
Therefore, the EUR/USD would remain lower. The first support of the pair would be 1.1200. A breach of the latter would expose the Nov 24, 2021 pivot low at 1.1186, followed by the Feb 24 yearly low at 1.1106.
Additional technical levels
Source: Fx Street