Euro Slides on Ukraine War Negotiations Hurdles Ahead of ECB Meeting. Where to for EUR/USD?


Euro, EUR/USD, ECB, US CPI, RBNZ, NZD/USD, BOC – Talking Points

  • The Euro is approaching recent lows as the Ukraine war outlook dims
  • APAC equities were quiet, except for Japan due to Yen weakening
  • Central banks hold the limelight, BoC today and ECB tomorrow.

The Euro continues to languish as the Ukraine war appears unlikely to find a resolution anytime soon. Russian President Vladimir Putin remarked that talks are “at a dead end.”

The ECB will be meeting on Thursday and while the market does not expect a move in rates, a more hawkish tone might be offered.

US CPI fallout continues, with Treasury yields inching up slightly in Asia today, after sliding notably lower in the US session.

APAC equities were mostly quiet today following on from small losses on Wall Street. The exception was Japan’s Nikkei 225 index, posting solid gains of over 1.75% at one stage, due largely to the weakening Yen.

Other currencies were mostly subdued in Asia, aside from the New Zealand Dollar. The RBNZ lifted the official cash rate 0.50% vs 0.25% expected, to 1.50%.

The initial reaction by the market was to buy the Kiwi over 69 cents. The ensuing statement painted a picture of a central bank looking to get in front of the curve to avoid hiking aggressively later on. Kiwi bonds rallied as yields ran lower across the curve. This undermined the currency.

The other commodity-based currencies AUD, CAD and NOK held their overnight gains, as did the underlying commodities themselves. It is the Bank of Canada’s (BoC) turn to raise rates today. The market is anticipating a 50 basis-point hike.

Crude oil, gold and silver are all near their North American closes. Although wheat was also higher overnight and is now 9% higher so far in April.

Looking ahead, after the UK inflation gauges, and US PPI, the aforementioned BoC meeting will be the focus for markets. Energy traders will be poring over the EIA crude oil inventory report.

The full economic calendar can be viewed here.

EUR/USD Technical Analysis

EUR/USD is approaching the lower bound of the 1.0806 – 1.1185 range it has been caught in since the end of February. The lower bound of the range is the lowest since May 2020.

A bearish triple moving average (TMA) formation requires the price to be below the short term simple moving average (SMA), the latter to be below the medium term SMA and the medium term SMA to be below the long term SMA. All SMAs also need to have a negative gradient.

When looking at the 10-, 21-, 34-, 55-, 100- and 200-day SMAs, the criteria for a TMA have been met using any combination of these SMAs.

Support could be at the prior low of 1.0806 while resistance might be offered at the previous highs and pivot points of 1.0945, 1.1138, 1,1185.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter





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