EUR/USD has dropped to a fresh low for the year, 1.1099.
”Traders are increasingly hedging against declines in the euro as they brace for the damage that war in Ukraine could wreak on the European economy,” a Bloomberg article read today.
The move is an extension of the weekly buildup on the short side and likely has much further to go from a technical perspective:
EUR/USD weekly chart
The Ukraine crisis is heating up with defence intelligence saying there are about 300 Belarussian tanks near the Belarussian-Ukrainian border.
The news wires are reporting that Russia is preparing a deliberate provocation to justify the entry of Belarussian troops into the conflict.
Europe remains highly exposed to Russia in some sectors, particularly energy,” analysts at TD Securities explained. ”As the West rushes to sanction Russia, Europe is likely to feel the hit the hardest. This poses a typical stagflationary shock, and growth is likely to be lower, and inflation higher, than otherwise.”
Meanwhile, the US dollar remains firm as the crisis in Ukraine continues with the DXY index up for the second straight day and trading now well above 97. The high has been 97.50 so far. After there, the levels to watch are the June 2020 high near 97.802 and May 25, 2020, high near 99.975.
This could leave the euro exposed all the way into the 1.0850s or even for a test of 1.08 the figure as per the weekly chart above. A canary in the mine is in the fall in European banks on Tuesday. Traders have dramatically scaled down their expectations of monetary tightening from the European Central Bank. The yield of Germany’s Bund has fallen into negative territory with a dramatic drop of 25 basis points.
