- EUR/USD fades the previous day’s rebound from 22-month low, sidelined of late.
- Softer yields, cautious optimism weigh on DXY as markets await Thursday’s Russia-Ukraine peace talks in Turkey.
- Fears of more economic hardships for the bloc, higher inflation keep EUR bears hopeful.
EUR/USD treads water around 1.0900 as traders take a sigh of relief, at least for now, from the Ukraine-Russia tensions during early Wednesday morning in Europe. Even so, anxiety ahead of Thursday’s key meeting in Ankara and fears of stagflation keeps the pair sellers hopeful.
The major currency pair posted the first positive daily closing in six the previous day as market Ukraine’s retreat from NATO membership joined the confirmation of the first humanitarian corridor in Kyiv to challenge the previous risk-off mood.
Following that, Venezuela’s freeing of the American prisoner and the US hint of easing sanctions afterward also favored the market sentiment and helps the EUR/USD buyers.
However, Russia may not cheer Kyiv’s intention to dump NATO membership on fears of joining the European Union (EU). The same demolishes President Vladimir Putin’s unsaid target of putting Kremlin-controlled leader in Ukraine and can keep the fears of further geopolitical tension on the table. Recently, Russia called for nationalizing foreign-owned factories that shut operations, which in turn raised doubt on the market’s optimism.
While portraying the mood, the US 10-year Treasury yields drop two basis points (bps) to 1.85% whereas the S&P 500 Futures remain firmer on a day at the latest.
Also testing the EUR/USD buyers is the fear of stagflation in the bloc. “The eurozone is particularly dependent on Russian energy and is, therefore, the most exposed to stagflation risks, though the United States isn't immune,” said Reuters.
Meanwhile, upbeat prints of German Industrial Production (IP) for January versus softer US economics favor EUR/USD to battle with the bears. German IP marked the strongest monthly growth since 2020 with a 2.7% mark. An increase in Eurozone’s Employment Change YoY for Q4, to 2.2% versus 2.1% expected and prior also favored the EUR/USD bulls. It should be observed that the Eurozone Q4 GDP confirmed 4.6% YoY growth on Tuesday.
On the other hand, the US trade deficit rallied to a record high and the small business confidence, as signaled by IBD/TIPP Economic Optimism gauge for March, dropped to the lowest in 13 months.
Moving on, a light calendar on Wednesday and mixed catalysts may keep troubling the EUR/USD traders ahead of the US Consumer Price Index (CPI) for February and Thursday’s peace talks between Ukraine and Russia in Turkey.
Technical analysis
The resistance-turned-support line of a two-week-old falling wedge and bullish MACD signals keep EUR/USD buyers hopeful.
That said, a clear upside break of the previous support line from mid-February, around 1.0930 by the press time, becomes necessary to convince the pair buyers.
Alternatively, a downside break of 1.0885 defies the latest falling wedge confirmation, which in turn will direct the EUR/USD prices towards the latest bottom surrounding 1.0800.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.