EUR/USD eyes to regain 1.1000 as Ukraine fears ebb ahead of ECB’s Lagarde

EUR/USD holds onto the week-start rebound to renew daily high around 1.0980, up 0.33% intraday during very early Tuesday morning in Europe.

The pair’s latest run-up could be linked to the US dollar’s pullback amid hopes of overcoming the Ukraine-Russia crisis by May. In doing so, the major currency pair ignores firmer US Treasury yields, as worsening covid woes in China.

Early Asian session comments from an Adviser to Ukraine President Volodymyr Zelenskyy’s office, Oleksiy Arestovych, suggesting an end of a war with Russia latest by May triggered initial risk-on mood on Tuesday. The moves also gained support from US Senator Marco Rubio who said, “Russia does not have the morale, manpower to take Kyiv at present,” suggesting a sooner end to the geopolitical crisis. However, chatters surrounding cruise missile strikes in Kyiv seem to challenge the market sentiment, as well as the EUR/USD buyers.

Also on the risk-negative side is the latest jump in China’s covid counts that caused fresh lockdowns in multiple cities, recently near the capital Beijing. “Mainland China reported 3,602 new confirmed coronavirus cases on March 14, the national health authority said on Tuesday, compared with 1,437 a day earlier,” said Reuters.

It’s worth noting that the European Commission increased sanctions on Russia the previous day even as Moscow showed readiness to pay Eurobond coupon, although in either Russian ruble or Chinese yuan. On the other hand, the US warned that China is offering military help to Moscow.

Against this backdrop, the market remains cautiously optimistic as the stock futures from the US and Europe print mild gains whereas the US Treasury yields renew the highest level since 2019. However, the US Dollar Index (DXY) fails to cheer the firmer yields and keep EUR/USD sellers hopeful ahead of today’s key events.

Among them, the Ukraine-Russia peace talks will gain major attention as the same was halted without any information the previous day. Following that, the US Producer Price Index (PPI) for February and a speech from the European Central Bank (ECB) President Christine Lagarde will be important to watch for fresh impulse. The US PPI is expected to refresh multi-day high with 10.0% YoY figures, versus 9.7% prior, which in turn could test EUR/USD bulls by supporting faster rate-hikes by the Fed. On the other hand, ECB’s Lagarde may reiterate her cautious optimism and defend the latest policy moves of the Quantitative Tightening (QT).

Technical analysis

EUR/USD buyers need a clear upside break of the 200-HMA, surrounding 1.0975 at the latest, to regain the 1.1000 threshold. However, 61.8% Fibonacci retracement (Fibo.) of February 25 to March 07 downside, at 1.1095, will challenge the pair buyers afterward.