- EUR/USD extends Friday’s losses, consolidates the biggest weekly gains in six.
- Off in Japan restricts yields but fears from Ukraine underpin DXY’s safe-haven demand.
- Multiple ECB policymakers tried to defend the rate-hike view, Fedspeak has been hawkish as well.
- Comments from ECB President Lagarde, Fed Chairman Powell can offer fresh impulse, Biden’s call with Western leaders eyed as well.
EUR/USD remains on the back foot for the second consecutive day, around 1.1045 amid Monday’s early European morning. The major currency pair rose the most since late January the last week amid the US dollar’s inability to cheer the Fed’s rate hike. However, the latest risk-off mood, mainly propelled by the Ukraine-Russia crisis, seems to favor the bears ahead of the day’s key events.
The escalated shelling in Ukraine by Russian forces joins Kyiv’s rejection of Moscow’s demand to surrender Mariupol to portray the recent geopolitical risks. On the same line is the attack on Saudi Arabian oil plants by Yemen’s Houthis, as well as an increase in China’s covid numbers and a suspension of trading in Hong Kong by the troubled real estate firmer Evergrande.
While the risk-off mood underpins the US dollar’s safe-haven demand, an off in Japan limits the Treasury moves and challenges the EUR/USD bears ahead of the speech from European Central Bank (ECB) President Christine Lagarde and Fed Chairman Jerome Powell.
During the weekend, multiple ECB policymakers ranging from Vice President Luis de Guindos to Robert Holzmann tried to defend the latest inaction by the bloc’s central bank. However, the policymakers did cite inflation fears, which in turn highlights today’s Lagarde speech for the pair traders. Should the policymaker anticipate easing of inflation fears, like Fed’s Powell, the EUR/USD prices may have a further downside to witness.
On the other hand, Fedspeak justified the rate-hike and dot-plot while also defending Powell’s expectations over inflation’s weakness in future by citing the geopolitical catalysts. As a result, today’s speech from Powell will be important for the quote as any change from the previous inflation view may help the USD to print more gains amid the latest risk-aversion.
Elsewhere, US President Joe Biden will have a call with the leaders of France, Germany, Italy and the UK, which in turn may escalate the risk-off mood if trying to exert more pressure on Moscow.
Talking about the data, Chicago Fed National Activity Index for February, expected to ease to 0.29 from 0.69, will decorate the calendar.
Technical analysis
Failure to cross a downward sloping resistance line from February, as well as bearish MACD signals, directs EUR/USD sellers towards the 100-SMA and a two-week-old rising trend line, respectively around 1.1030 and 1.0990.
Meanwhile, recovery moves will initially aim for the aforementioned resistance line, at 1.1105 by the press time.