The EUR/USD price remains on the back foot as the dollar king dominates the market in the wake of a 50-bps rate hike in the upcoming Fed meeting.
- EUR hit its weakest in 25 months against the greenback
- DXY rises to a new two-year high on interest rate hike expectations
- EU members remain hesitant to put an embargo on Russian oil
EUR/USD fundamental forecast
At the London session, EUR/USD is hovering below 1.07, the level it hit in March 2020.
EUR down
The dollar surged to a new two-year high on Tuesday. At the same time, the euro fell to its lowest level since March 2020, as investors worried about the economic impact of China’s Covid-19 lockdowns and hawkish US interest rate rise forecasts bolstered the greenback.
Concerns over the impact of the Ukraine war on the European regional economy have weighed on the euro, as have forecasted that the European Central Bank will raise interest rates considerably more slowly than the Federal Reserve.
Martins Kazaks of the European Central Bank has joined a clamor of officials demanding a quick departure from a stimulus, implying that the bank should increase rates soon and has the capacity for up to three rises this year.
Embargo on Kremlin
Reports that the EU may contemplate imposing a price restriction on Russian oil importers to reduce Kremlin income also impact EUR bulls.
Italy is one of the member countries that has spoken out in favor of attempting to control the price of Russian energy. On the other hand, Germany is doubtful, saying that establishing a price would be impossible and possibly a breach of contract.
What does the greenback hold?
DXY upside is still a good option. However, China’s growth risks are increasing as the government pursues harsh Covid measures, the situation in Ukraine continues to be turbulent, and the Fed is as hawkish as ever.
Benchmark US 10-year rates rose one basis point to 2.829% after falling from hawkish Fed-induced highs on Monday, as the China lockup and economic concerns drove investors to the shelter of US Treasuries.
Key data releases from the EUR
The euro docket remains empty today.
Key data releases from the US
Investors in the US will be looking for data on Consumer Confidence in the United States, coming later this month.
What’s next to watch for EUR/USD?
Today’s USD will be influenced by US consumer confidence. Furthermore, China Covid fears and the Fed’s hawkish wagers will keep the buck largely supported. On the other hand, the spotlight will be on the Russian-Ukrainian war, which might help the USD.
EUR/USD technical analysis: looks fragile
EUR/USD has hit the 25 moths low today as the pair dipped below the 1.07-level. At the time of writing, the pair is trading at 1.0648. It has lost 0.25% so far. The pair is way below its 100-day moving average on the daily chart, and the RSI is just above 30.
EUR/USD is now hitting the 1.0648 level. A fall below 1.6233 will bring the pair towards the 1.0550 support level. If the pair falls below this level again, it will challenge the next support level, 1.0500.
On the upside, the pair can go towards the next resistance level, around 1.0788. A break over 1.0861 will pave the door for a test of the following resistance level of 1.0907.
