EUR/USD Forecast: Bears take advantage of war fears, central bankers’ hawkishness

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.1065

Russian attacks on Ukraine continue, despite ongoing peace talks.
US Federal Reserve chief Jerome Powell is due to testify for a second consecutive day.
EUR/USD is suffering from risk aversion, could soon pierce the 1.1000 figure.

The EUR/USD pair remains under selling pressure, trading near the multi-month low posted this week at 1.1056. Markets are cautious, as the war in Eastern Europe sees no end, while its consequences are disrupting global economies. Commodity prices keep skyrocketing, with crude oil and gas prices at multi-year highs. The Russian stock market remains closed but shares of EU companies with a Russian exposure plunged. Meanwhile, the country is at the brink of default amid the global sanctions. Nevertheless, attacks on Ukraine continue, and Russian President Vladimir Putin told his French counterpart Emmanuel Macron that the goals of Russia's operation in Ukraine would be achieved in any case.

Earlier in the day, the European Central Bank released the account of its latest meeting, which showed that members believed a scaling-back of monetary accommodation should commence, adding that members believe that inflation was likely to continue higher-than-predicted for longer. Additionally, policymakers noted that the greatest risk was no longer tightening monetary policy too soon but too late.

Data wise, Markit released the final readings of its February Services and Composite PMIs, most of which were downwardly revised in the EU. The Union also published the January Producer Price Index, which jumped to 30.6% YoY, reflecting persistent inflationary pressures.

In the US, Initial Jobless Claims for the week ended February 25 resulted better-than-expected, at 215K. The country is yet to release the February official ISM Services PMI, foreseen at 61, while US Federal Reserve chief Jerome Powell will testify for a second consecutive day.

EUR/USD short-term technical outlook

The EUR/USD pair trades in the 1.1070 price zone and still looks bearish in its daily chart. It keeps developing far below its moving averages, which are heading firmly lower, reflecting prevalent selling interest. The Momentum indicator lost its bearish strength and consolidates near oversold readings, while the RSI indicator keeps heading south at around 32.

The 4-hour chart shows that the pair remains below a firmly bearish 20-SMA, while technical indicators head lower within negative levels, lacking strength but still skewing the risk to the downside. The pair will likely pierce the 1.1000 threshold on a break below 1.1055, the immediate support level.

Support levels: 1.1055 1.1010 1.0965

Resistance levels: 1.1135 1.1180 1.1220

View Live Chart for the EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

AUD/USD meets support near 0.7150

AUD/USD comes under renewed and quite strong selling pressure ahead of the Asia opening bell on Friday, drifting back toward multi-day troughs near 0.7150, where it seems to have met some decent contention for now. The Aussie’s decline follows the inflation-reignited uptick in the Greenback in response to robust US factory-gate prices in August.

USD/JPY consolidates around 153.50 as bears turn cautious ahead of US inflation

USD/JPY stabilizes above 153.50 during the Asian session on Thursday, but remains near a seven-month low set earlier this week as hawkish BoJ repricing continues to underpin the Japanese Yen. Meanwhile, rising September Fed rate-hike bets and escalating US-Iran tensions help ease US Dollar selling pressure, offering some support to the currency pair ahead of US inflation figures.

Gold remains weak, retargets $4,350

Gold keeps the choppy price action on Thursday, now slipping back toward the $4,350 region per troy ounce amid the robust bounce in the US Dollar as well as rising US Treasury yields across the curve, particularly following US Producer Prices and ahead of Friday’s more relevant US CPI data.

Bitcoin holds steady on positive ETF flows despite short-term holders cashing in

Bitcoin's exchange-traded funds (ETF) demand regime has notably shifted, with 30-day net inflows reaching $21.9 billion, according to a Thursday post by CryptoQuant. The data suggests that the average Bitcoin held through spot ETFs is now in profit, with the realized price of the ETF cohort standing at roughly $72,000 to $73,000.

ECB recap: A hawkish hike despite downside growth risks

The European Central Bank (ECB) increased the Deposit Facility Rate to 2.50%, the Refinancing Rate to 2.65% and the Marginal Lending Facility to 2.90%, effective from September 16. The decision was accompanied by a clear warning that the outlook remains highly uncertain, with risks tilted to the upside for inflation and to the downside for growth.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.