Europe and America Unite as the Ukraine-Russia War Weighs on EUR/USD
Euro, US Dollar Talking Points
- EUR/USD slides back to support, Ukraine and Russia drive safe-haven currencies
- EUR loses grip temporarily ,Germany intervention and exacerbated supply constraints pushes energy prices (oil and gas) higher
- USD safe-haven appeal drives price action lower but EUR/USD bears fail to break 1.110
With global leaders now uniting in support of Ukraine, additional sanctions against Russia by both the EU and the US has raised additional concerns over energy prices, a key contributor of rising inflation.
Following the announcement that Germany, Europe’s largest economy, would send military assistance to Ukraine, the EUR fell, supporting the safe-haven Dollar.
As inflation remains a key concern for policy makers, the ECB (European Central Bank) and Federal Reserve now face additional hurdles, casting a shadow of doubt over the pace at which interest rates will rise.
EUR/USD Technical Analysis
EUR/USD price action is under pressure as the major currency pair remains vulnerable to geopolitical risks.
Although the downward trajectory (from the June 2021 high) is currently intact, price action remains encapsulated between key Fibonacci levels of both the historical and the 2020 – 2021 move. After falling below 1.129 (the 61.8 Fibonacci level of the 2020 – 2021), bears managed to drive price action lower before finding support at around 1.213 (the 76.4% retracement of the 2014 high and 2017 low).
With prices currently resting comfortably below the 50-day MA (moving average), the key psychological level of 1.110 remains as a key psychological level which will likely continue to hold bears at bay. Meanwhile, the CCI (commodity channel index) has fallen into negative territory, a possible indication that the pair may be oversold.
EUR/USD Daily Chart
Chart prepared by Tammy Da Costa using TradingView
EUR/USD Key Levels
- S1: 1.200
- S2: 1.112
- S3: 1.110
- R1: 1.128
- R2: 1.13
- R3: 1.14
EUR/USD: Retail trader data shows 60.25% of traders are net-long with the ratio of traders long to short at 1.52 to 1. The number of traders net-long is 24.36% higher than yesterday and 6.89% higher from last week, while the number of traders net-short is 1.55% higher than yesterday and 24.15% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall.
Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/USD-bearish contrarian trading bias.
--- Written by Tammy Da Costa, Market Writer for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.