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- EUR/USD remains depressed near the weekly low amid the emergence of some USD buying.
- The Russia-Ukraine crisis, Fed’s hawkish outlook acted as a tailwind for the safe-haven USD.
- Investors eye Eurozone/US PMIs, EU leaders summit and NATO meeting for a fresh impetus.
The EUR/USD pair struggled to capitalize on the previous day's modest bounce from the 1.0960 area and met with a fresh supply on Wednesday amid the emergence of some US dollar buying. Tensions in Ukraine, so far, have shown no signs of de-escalating. Apart from this, the lack of progress in the Russia-Ukraine peace negotiations kept investors' on the edge. The market sentiment was further weighed down by concerns about surging oil prices, which continues to put upward pressure on the already high inflation due to the supply-chain bottleneck. This, in turn, took its toll on the global risk sentiment and drove some haven flows towards the greenback.
The buck was further underpinned by hawkish comments from influential FOMC officials, signaling that they are ready to take more aggressive action to combat stubbornly high inflation. In fact, Fed Chair Jerome Powell, along with San Francisco Fed President Mary Daly and Cleveland Fed President Loretta Mester, indicated a bigger hike was in the offing at the central bank's May meeting. The markets were quick to react and started pricing in the possibility of a 50 bps rate hike at both the May and June meetings, followed by a 25 bps hike at the remaining meetings of 2022. This was seen as another factor that continued lending support to the USD.
The shared currency was further pressured by the disappointing release of the eurozone Consumer Confidence index. According to the flash estimate released by the European Commission, the gauge dropped to -18.7 in March from -8.8 in the previous month. That said, the global flight to safety led to a modest pullback in the US Treasury bond yields and held back the USD bulls from placing aggressive bets. This, in turn, helped limit further losses and assisted the pair to find some support in the vicinity of the weekly low. The attempted recovery move, recovery, however, lacked follow-through buying and was sold into during the Asian session on Thursday.
The pair traded in the negative territory for the fourth day in the previous five as the focus remains on fresh developments surrounding the Russia-Ukraine saga. US President Joe Biden has arrived in Brussels for a series of meetings on the Ukraine War. Biden will meet NATO and European leaders are set to announce a package of sanctions targeting Russian politicians and oligarchs. The incoming geopolitical headlines would play a key role in influencing the broader market risk sentiment and the shared currency, which, in turn, should provide impetus to the major. Apart from this, traders will take cues from the flash version of the Eurozone PMI prints.
The US economic docket features the release of Durable Gooders Orders and the usual Weekly Initial Jobless Claims data and flash PMIs later during the early North American session. This, along with the US bond yields, will drive the USD demand and produce some meaningful trading opportunities around the pair.
Technical outlook
From a technical perspective, the pair, so far, has managed to defend the 23.6% Fibonacci level of the recent slump from the vicinity of the 1.1500 mark. The said support, around the 1.0960 region, should act as a pivotal point, which if broken decisively should pave the way for additional losses. The pair might then turn vulnerable to accelerate the slide back towards the 1.0900 round figure. Some follow-through selling would expose the YTD low, around the 1.0800 mark, with some intermediate support near the 1.0860-1.0850 region.
On the flip side, the 1.1045 area now seems to have emerged as immediate resistance and is closely followed by the 38.2% Fibo. level, around the 1.1070 zone. Sustained strength beyond could push spot prices back towards the 1.1100 mark en-route last week's swing high, around the 1.1135-1.1140 region. The latter nears the 50% Fibo. level, which if cleared decisively would be seen as a fresh trigger for bullish traders and set the stage for additional gains. The pair might then aim to surpass the 1.1200 mark and test the next relevant hurdle around the 1.1230 region, or the 61.8% Fibo. level.
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