An announcement by the U.S and the UK banning Russian oil imports as well as a pledge by EU leaders to cut Russian gas imports by two-thirds by year-end have the potential to deliver the fatal economic strike needed to bring President Putin’s war machine to its knees.
Also, providing support to the EURUSD reports the European Union could unveil a potentially extensive bond issuance program to finance the continent’s energy and defence needs. Although the size of the potential issuance is still to be determined, the proposal could be presented after an informal summit in Versailles and is another show of Western unity behind Ukraine.
After making a fresh cycle low at 1.0805 earlier this week, the EURUSD was able to close higher at 1.0910 (0.52%), while EURCHF held onto the bulk of its gains to close the session at 1.0125 (0.82).
Turning to the charts, the EURUSD has fallen by ~6% from its February 1.1495 high, while EURCHF has fallen by a similar magnitude. This suggests that the overnight rally in EURUSD and EURCHF was traders locking in profits, not a trend reversal.
More so, as the war in Ukraine is likely to push back ECB hikes until 2023, heightens the risk premia attached to European assets. And as real money accounts increase hedges on European assets.
As such, the preference is to sell bounces in the EURUSD, leaning against the layer of resistance between 1.1200 and 1.12230 looking for a push lower towards the “Covid Crash” 1.0636 low.
Source Tradingview. The figures stated areas of March 9th, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation