- EUR/USD drops to the fresh low since May 2020, extends four-week downtrend.
- Market sentiment worsens as Russia escalates military invasion of Ukraine despite Western sanctions, peace talks.
- US jobs report, comments from Fed’s Evans exert additional downside pressure.
- US CPI for February, ECB will be crucial catalysts but Russia-Ukraine headlines top.
EUR/USD extends the four-week downtrend towards hitting a fresh multi-day low as the trading week begins. That said, the major currency pair dropped to the lowest levels last seen during May 2020 before taking a breather around 1.0860.
The bears, however, keep reins amid broad risk-off mood and escalating pressure on the Fed to lift benchmark rates at a faster pace due to increasing inflation.
The Russia-Ukraine crisis is the key catalyst recently weighing on the risk appetite as the neighbors portray geopolitical tensions. That said, the evacuation of Ukrainian civilians is jittery during the weekend as Russian forces kept marching towards Kyiv. Recently, the Moscow-led militaries blew an airport in central Ukraine while Friday’s threat over nuclear facilities was the biggest. The West tries to tame Moscow’s moves with more sanctions with the latest discussions on banning energy imports. However, Russian President Vladimir Putin remains determined to complete the “operation” and demands Ukraine’s complete surrender for peace.
Elsewhere, an upbeat US jobs report, as well as hawkish comments from Chicago Fed President and FOMC member Charles Evans, act as an additional bearish indicator for the EUR/USD prices. The US jobs report for February showed that the headline Nonfarm Payrolls (NFP) rose by 678K, well above the median forecast of a 400K figure and upwardly revised 484K prior. On the same line, the Unemployment Rate dropped to 3.8% versus 4.0% previous readings and 3.9% expected. It’s worth noting that the inflation-concerned Fed also had a reason to like the February employment report as the Average Hourly Earnings (AHE) rose 5.1% YoY versus market consensus of 5.8% and the revised down 5.5% figure for January.
On the other hand, Fed’s Evans said, per Reuters, “The U.S. central bank is on track to raising rates this year, though it may be ‘more than I think is essential to do so at every policy-setting meeting.”
Against this backdrop, Wall Street closed in the red and the US 10-year Treasury yields also posted the biggest weekly loss since mid-2020. It should be noted that the S&P 500 Futures drop over 1.0% by the press time.
Looking forward, a light calendar on Monday may keep the risk catalysts in the driver’s seat but major attention will be given to the European Central Bank’s (ECB) monetary policy meeting and the US Consumer Price Index (CPI) for Friday.
Read: The euro will remain weak against the dollar as Europe will remain at the heart of the crisis
Technical analysis
A clear downside break of the 1.1000 psychological magnet, also comprising the 61.8% Fibonacci Expansion (FE) of the pair’s moves between September 2021 and February 2022, keeps EUR/USD bears directed towards early 2020 lows near 1.0640-35.