EUR/USD on verge of breaking below 21DMA and 1.1000 as calls for EU boycott on Russian energy grow

• EUR/USD looks on the verge of breaking back below its 21DMA and the 1.1000 level.
• Calls for an EU-wide boycott of Russian energy imports have risen as evidence of Russian war crimes in Ukraine emerges.
• That is weighing on EUR while further hawkish Fed vibes continue to support USD, with EUR/USD bears eyeing 1.0950 support.

EUR/USD reversal lower from last week’s peaks around the 50-Day Moving Average in the upper 1.1100s has continued at the start of this week, with the pair now on the verge of breaking back under 1.1000. A break below this key psychological level, which also coincides with the 21-Day Moving Average at 1.1007, would likely open the door to a test of last Monday’s lows in the 1.0950 area. Below that, there is very little by way of technical support ahead of the annual lows just above 1.0800 and recent fundamental developments support an increasingly bearish outlook for EUR/USD in the short-term.

Over the weekend, as the Ukrainian military recaptured large swathes of territory to the north of Kyiv as the Russians pullback to redeploy more towards the East, Western media outlets have been abuzz reporting on evidence of Russian war crimes. As a result, calls within the EU for a blanket ban on Russian energy imports have once again resurfaced. Most recently, French President Macron was on air calling for a ban on Russian oil and coal imports. As more evidence of war crimes emerge and the pressure to take tougher action build, the downside risks to the euro also grow. After all, a blanket ban on all Russian energy imports would likely thrust the bloc into a deep recession, with the likes of Germany particularly affected.

All the while, the tense geopolitical situation continues to favour inflows in the safe-haven US dollar, which is also benefitting from the backdrop of increasingly hawkish Fed rhetoric. Fed’s John Williams warned that balance sheet reduction could start as soon as May and Fed’s Mary Daly said the case for a 50 bps rate hike in May has grown. Various further Fed policymakers will be making public appearances and talking policy throughout the week and the minutes of the Fed’s most recent, hawkish meeting will be published on Wednesday. That should keep EUR/USD focus on bullish US dollar fundamentals, meaning data like German Industrial Production likely won’t get a whole lot of attention.