EUR/USD bears lurking near to H4 technical support, Ukraine crisis dominates

EUR/USD is back to being in the green in midday New York trade after being underwater at the start of the session when it was near to the lows of the day, 1.0944. The pair has perked up following a weakening in the US dollar and has climbed to a session high of 1.0999.

EUR/USD has caught a bid following mixed data and softer US yields that started to decline in the European session with the 2-year yields sliding from 2.414% to a low of 2.292% by very early North American trade. Meanwhile, markets will be on alert for developments in the main driver as being developments in the Russian invasion of Ukraine over the past month, this has taken centre stage with geopolitical uncertainty reaching new heights.

Consequently, higher commodity prices and rising global recession risk have been clear negatives for most G10 currencies namely the broad EUR. The currency has fallen around 6% since the middle of February and 2022 highs near to 1.15 the figure. 

Ukraine / Russia peace talks

There has been some relief over the weeks on hopes of peace negotiations, although when it comes to the possibility of a Putin-Zelenskiy meeting, the Kremlin says there has been no progress. The Russian Foreign Minister Lavrov said recently that any meeting between Putin and Zelenskiy to exchange views currently would be counter-productive.

Meanwhile, Ukraine and Russia said their delegations would arrive in Turkey for peace talks that are expected to take place on Tuesday. Nevertheless, a senior US official said Russian President Vladimir Putin did not appear ready to make compromises. Ukrainian officials are also playing down the chances of a major breakthrough at the talks.

Currency positioning data 

The crisis is driving the positioning of investment in the currency futures as well with the latest  CFTC Commitment of Traders Report showing that Speculators’ net long USD index positions have crept higher. The ''safe-haven demand for USDs and expectations for progressive Federal Reserve rate hikes this year suggest the USD is set to remain well supported going forward,'' analysts at Rabobank said. 

The analysts also explained that Net EUR Speculators’ net longs recovered some ground having dropped back significantly to their lowest level since January the previous week. ''ECB President Lagarde heavily caveated the central bank’s hawkish policy outlook in March. Also, the Russian invasion of Ukraine and questions about Europe’s energy security have undermined EUR in the spot market.''

Key data events to watch for

As for the economic calendar for the week ahead, the US jobs market and eurozone inflation data will be keenly eyed. The US Nonfarm Payrolls at the start of the new month on Friday is likely to show that Employment continued to advance in March following two strong reports averaging +580k in Jan and Feb, analysts at TD Securities argued.

''That said, we expect some of that boost to fizzle, though to a still firm job growth pace of +350k. Indeed, job gains should lead to a new drop in the unemployment rate to a post-COVID low of 3.7%. We also expect wage growth to slow to a still firm 0.3% MoM pace.''

As for eurozone inflation, the analysts expect ''headline HICP inflation to soar across the euro area in March, mostly due to a substantial surge in energy prices.''

They are also looking for a rise in non-energy industrial goods prices to boost euro area core inflation to a 28-year high of 3.2% (mkt: 3.1%). ''However, newly passed energy subsidies and price caps add some downside risk to our headline forecasts.''

EUR/USD levels

As per the 4-hour chart above, the price is stuck between support and resistance but trades with a bearish bias while below the counter trendline. If the price manages to close below support, this could signify the makings of a downside continuation and solidify the breakout below the counter trendline for the coming week ahead.