EUR/USD Cautious After its Worst Day of the Year


No SWIFT Action

Russian President Putin launched a "special military operation" against Ukraine on Thursday [1], which sparked a risk-off wave in financial markets and sent investors to safe-havens, such as the US Dollar and the Japanese Yen.

Ukranian Foreign Minister Mr Kuleba, said the move was "a full-scale invasion" of his country [2] and called for "Devastating sanctions on Russia NOW", including cutting it off form the SWIFT banking network [3].

Western powers condemned the attack and announced new sanctions against Russia, however these did not include the SWIFT system, nor any ban on Russian oil and gas. As such, the measures were largely deemed as underwhelming.

This helped market sentiment rebound and after yesterday's volatility, investors appear calmer today, albeit still cautious.

The situation remains precarious, with Ukranian President Zelenskyy saying that Russia continued to launch missile strikes on the territory of Ukraine at 4 am local, in his address earlier today. [4]

US President Biden warned that Mr Putin "has much larger ambitions in Ukraine. He wants to, in fact, reestablish the former Soviet Union", authorized additional forces to deploy to Germany and stressed that "the United States will defend every inch of NATO territory with the full force of American power". [5]

EUR/USD Reaction

The pair plunged on Thursday to the lowest level since June 2020 and registered its worst day of the year, but managed to cover some of the losses, as sentiment improved during the US session.

Today it is cautious and vulnerable to fresh lows, although a new catalyst may be needed for that and a bigger decline towards and beyond mid-1.1000s.

On the other hand, the common currency may find the chance to push towards 1.1250-70, but significant improvement in sentiment will be required for such a move and a break above the EMA100, while the upside seems well contained.

Caution is needed as volatility remains elevated and markets digest news around Ukraine, while bracing for another inflation update from the US, in the form of the Personal Consumption Expenditures (13:30 GMT).

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.



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