Currency Analyst since 2010

EUR/USD: Ukraine creates pressure (video)

  By Elizaveta Belugina

During the past week the bulls failed to make a deeper correction up, and EUR/USD set a new 2014 low at $1.3332. The Ichimoku Cloud on H4 was acting as a very good resistance. The second part of the week was consolidative. Even the ECB’s press conference on Thursday went by calmly: there very some intraday spikes, but the day’s trading range wasn’t very wide.

Resistance is now in the $1.3410 area and at $1.3450. On the downside target levels remain the same $1.3320, $1.3295 (Nov. 2013 low) and $1.3230 (100% Fibo expansion).

The European Central Bank kept policy unchanged and indicated that it will continue doing so for a time being. Its President Mario Draghi said that inflation expectations have been firmly anchored. Although Draghi said that the regulator is preparing asset-backed securities purchases, which is a kind of QE, he underlined that this step will be possible only if inflation or credit growth forecasts are cut. Despite this undisturbed attitude to inflation, the overall ECB statement can be considered dovish as Draghi mentioned geopolitical risks, slowdown in the euro area’s economic growth momentum and, the most important thing, the divergence of the ECB’s and the Fed’s interest rates policy which is acting against EUR.

On Friday euro recovered as some short covering took place. The Cloud on H4 has thinned, so the bulls may try their luck. Still with all the escalating tensions about Ukraine the pair’s recovery should be difficult and limited by $1.3490/3500. Next week worse-than-expected euro zone’s data, which are pretty likely to come out, will make the single currency test the recent lows and more. In addition, German 10-year yields are significantly lower than the US ones.

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