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EUR/USD Forecast: Euro Holding Firm Amidst Rising Tensions in Ukraine & Looming Fed

EUR/USD Forecast: Euro Holding Firm Amidst Rising Tensions in Ukraine & Looming Fed

Warren Venketas, Analyst

EUR/USD ANALYSIS

  • Dollar helps keep Euro afloat.
  • IG Client Sentiment: Mixed
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EURO FUNDAMENTAL BACKDROP

An interesting open to the trading week for EUR/USD, after a grim backdrop from both geopolitical and economic spheres. Euro strength is largely attributed to dollar weakness despite U.S. Treasury yields edging higher as markets expect a Fed rate hike on Wednesday later this week. Inflation pressures are rising which the Fed will need to address in the post-announcement press conference despite the war in Ukraine which has added to these upside stresses. Money markets are almost fully pricing in a 25bps interest rate hike leaving most of the attention on the press conference.

With an uneventful economic calendar today, focus will shift to geopolitics for market movers, ECB commentary and sanctions. This morning we have already seen the ECB’s Kazaks state that rate hikes may not be the most suitable path of action when tackling inflation (due to rising energy prices). However, EUR/USD moved little in reaction to this comment.

TECHNICAL ANALYSIS

EUR/USD DAILY CHART

EUR/USD daily chart

Chart prepared by Warren Venketas, IG

Daily EUR/USD price action shows bulls pushing marginally above the long-term symmetrical triangle pattern mentioned in my weekly fundamental forecast. With hikes on the way, bears will be looking out for hawkish comments from Fed Chair Jerome Powell to bring back the pair from recent upside as momentum remains firmly to the downside.

Resistance levels:

  • 1.1121
  • 20-day EMA (purple)
  • 1.1000

Support levels:

  • Triangle support
  • 1.0876

CAUTIOUS IG CLIENT SENTIMENT DATA

IGCS shows retail traders are currently LONG on EUR/USD, with 67% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, recent changes in long and short positions have resulted in a watchful bias.

Contact and follow Warren on Twitter: @WVenketas

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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