EURUSD and geopolitical volatility
EURUSD chart analysis
The euro strengthened, and the dollar retreated on Monday as investors diverted capital from safe-havens. After US President Joe Biden and Russian President Vladimir Putin agreed in principle to meet to discuss the crisis in Ukraine. Hopes that the crisis was moving towards de-escalation were felt through most classes of financial resources, and European stock markets opened in bullish territory. The secure currencies that benefited from the tensions caused by the strengthening of the Russian army on the Ukrainian borders are now on the defensive. “The market is likely to continue to chase headlines without any clarity about the final outcome,” Barclays analysts warn.
Currency market participants are also focused on central bank policy, seeking indications of the speed and magnitude of interest rate increases in major markets. Investors will follow the statements of US Federal Reserve policymakers this week in search of a hint that the expected rate increase at the March Fed meeting could turn more than 50 basis points instead of the current consensus for a rise of 25 basis points.
The German economy is likely to shrink again this quarter as a new wave of coronavirus infection prevents many people from going to work, the Bundesbank said on Monday, predicting a recovery in the spring.
Europe’s largest economy has moved in the opposite direction in the last three months of 2021, as supply barriers have hit its large industrial sector.
The rapid spread of the Omicron variant has affected services and employment in general. “Unlike previous waves of the pandemic, measures to combat and change behavior are probably not just activities in the services sector,” the German central bank wrote in a monthly report. Pandemic-related absenteeism is likely to reduce economic activity in other sectors as well significantly.
Looking at the chart, we see that the pair is still moving in the range 1.13000-1.14000, without any major indications that there will be any major shift in the chart. This morning, EURUSD tested the 1.14000 resistance line and quickly retreated to 1.13500, seeking support on the MA200 moving average. For now, the EURUSD pair is failing to form a new higher high or lower low, which would help us better assess trends and determine potential trends.
Bullish scenario:
- We need positive consolidation and growth above 1.14000, which would give us additional support in moving averages.
- Then we can very quickly find ourselves in the next resistance zone, 1.14850-1.15000. This zone is an obstacle for us for a stronger bullish trend.
- If the euro strengthens sharply, the following potential resistance zones are at 1.16000 and even 1.17000.
Bearish scenario:
- We need negative consolidation and a price retreat below 1.13000 and below all moving averages.
- After that, he can expect increased bearish pressure, which would probably lower EURUSD to the lower potential supports.
- Our first support is at 1,12500, a place for crossovers MA20 and MA50 moving averages.
- Our next potential support zone is 1.11200-1.11500, this year’s minimum zone.
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