EUR/USD renews weekly low near 0.9920 amid fresh fears from Russia, hawkish Fed bets

• EUR/USD takes offers to refresh one-week low, down for the second consecutive day.
• Russian President Vladimir Putin talks about defending territories and Russia.
• Yields extend pullback from multi-day high but DXY approaches 20-year peak.
• Fed’s 0.75% rate hike may not impress bears but FOMC Statement, Powell can, ECBSpeak eyed too.

EUR/USD remains on the back foot for the second consecutive day as market’s risk-aversion intensifies during the Fed day. In addition to the market’s anxiety ahead of the Federal Open Market Committee (FOMC) meeting, escalating geopolitical fears from Russia also weigh on the major currency pair.

In his much-delayed TV address, Russian President Vladimir Putin said, “I tell the West, we have lots of weapons to reply, it is not a bluff.” Other than the direct threats to the west, Putin also mentioned that Russia is to take necessary steps to defend its sovereignty.

The same renew market’s fears of more geopolitical tension between the West and Moscow, which in turn is likely to hurt the Eurozone the most, due to its proximity to Ukraine and the latest sanctions on Russia. Elsewhere, headlines suggesting US Senators’ demand for secondary sanctions on Russian oil also appear to challenge the market’s risk appetite.

It’s worth noting that the risk-aversion propels the US Dollar Index (DXY) towards the yearly high marked earlier in the month, up 0.23% intraday near 110.41 at the latest. In doing so, the greenback’s gauge versus the six major currencies ignores the latest pullback in the US Treasury yields while respecting the hawkish Fed bets.

That said, the US 10-year Treasury yields retreat from the 11-year peak while the 2-year counterpart eased from the 15-year high. Also portraying the risk-aversion are the stock futures from the West and the Asia-Pacific equities.

Moving on, announcements from the ECB’s Non-Monetary Policy Meeting and comments from ECB Vice President Luis de Guindos could offer immediate directions to the EUR/USD pair.

However, major attention will be on how the Fed manages to keep the DXY bulls hopeful even after announcing the 0.75% rate hike, which is already priced in. For that matter, the Fed’s economic forecasts and a speech from Fed Chairman Jerome Powell will be crucial to watch.

Also read: Federal Reserve Preview: Forecasting 5% interest rates? Dollar to move on dot-plot, Powell's pledges

Technical analysis

A clear downside break of the two-week-old support line, near 0.9950, appears necessary for the EUR/USD bears to aim for a yearly low surrounding 0.9860.