EUR/USD erases previous losses and climbs towards the 1.1220 area amid a mixed-market mood

• The EUR/USD rallied in the middle of a slight improvement on market mood.
• The EU, US, UK, and Canada imposed another tranche of sanctions, spurring a risk-off market mood amid the escalation of the conflict.
• Spain inflation figures were reported, with the HICP expanding by 7.5% y/y higher than the 6.8% estimated.
• EUR/USD remains downward biased and might test the YTD low at 1.1106 as Ukraine – Russia’s war fails to de-escalate.

On Monday, the single currency began the week with a gap down from Friday’s close at 1.1273, to 1.1122 open, on harsh sanctions imposed on Russia, from the US, Eurozone, UK’s and Canada, among other countries. Market participant’s reaction augmented demand for safe-haven assets. In the FX space, the USD, JPY, and CHF witnessed ebbs towards them, while the EUR began on the wrong foot, though late developments have seen the pair climbing. At press time, the EUR/USD is trading at 1.1224.                                                                     

Ukraine - Russia war updates

Over the weekend, the EU, US, UK, and Canada agreed to “prevent the Russian central bank from deploying its international reserves in ways that undermine the impact of our sanctions,” per The Guardian. The objective is to paralyze Russian assets. Additionally, the US Placed sanctions on Russia’s top 10 financial institutions while having frozen assets of the Russian President and Russian ministers. Furthermore, a dozen Russian oligarchs with ties with Putin witnessed the same alongside a travel ban.

In the meantime, the Eurozone economic docket featured inflation figures for Spain. Spain’s HICP in February rose by 7.5% y/y higher than 6.8% estimated, while the inflation rate hit the 7.4% y/y more than the 6.1% of January.

Recent ECB speaking talked about downside risks to eurozone growth from the Ukraine crisis, but clear upside inflation risks haven’t even begun to be fully felt. ECB’s meeting in March would be interesting. Analysts at Brown Brothers Harriman said that they “expect the bank to confirm that PEPP will end as scheduled, we believe Lagarde and company will try to maintain maximum optionality to see how the situation unfolds.”

Meanwhile, Fed speakers witnessed Bullard and Waller maintaining their hawkish stances, favoring a 50 bps move. On Monday, Atlanta’s Fed President Raphael Bostic will cross the wires.

The US economic docket featured Goods Trader Balance for January, which printed a deficit of $107.63 B vs. $100.47 B estimated. At the same time, February’s Chicago and Dallas Fed Manufacturing Indexes came better than expected at 56.3 and 14, respectively.

EUR/USD Price Forecast: Technical outlook

The EUR/USD daily chart shows that the pair is downward biased. Why? The daily moving averages (DMAs) reside above the spot price, aiming lower, indicating that the downtrend might accelerate in the near term. Nevertheless, Monday’s gap down increased buying pressure on the pair, but as long as Ukraine – Russia’s war does not stop, the EUR/USD would be subject to market mood swings unless a peace agreement is reached.

Therefore, the EUR/USD would remain downwards. The pair’s first support would be 1.1200. Breach of the latter would expose the 2021 November 24 pivot low at 1.1186, followed by February 24 YTD low at 1.1106.