Euro Collapses Against Major Counterparts, Safe-Haven Assets Rally
Euro at Record Lows as Ukraine Conflict Deepens
by Bogdan Giulvezan
The US Dollar strengthened late last week as the Non-Farm Payrolls report showed that 678K new jobs were created, above the forecast 407K. The data, coupled with the worsening of the Ukrainian war, made investors flock to safe-haven currencies such as the greenback, while economic worries weakened the Euro.
The US Dollar Index (DXY), which tracks the dollar’s performance against a basket of 6 major currencies, is trading at 99.08 at the time of writing, which is the highest it’s been since May 2020. On Monday the Euro fell below 1.0850 against the USD, the lowest it’s been since the same month of 2020.
Key Events for the Week Ahead
The first couple of days of the week are relatively quiet in terms of economic releases but the action picks up Wednesday with the release of the U.S. JOLTS Job Openings. The report tracks the number of open jobs during the respective month, excluding the farming sector. It is a leading indicator of employment but the impact varies and it is not generally regarded as a high-impact indicator. The time of the release is 3:00 pm GMT and the expected number is 10.91M; higher numbers can further strengthen the greenback.
Thursday at 12:45 pm GMT, the ECB will convene to announce the Monetary Policy Statement and the interest rate, while 45 minutes later, ECB President Christine Lagarde will hold the usual press conference. High volatility is usually experienced during the press conference and possibly more so now, considering the Ukrainian war.
Also Thursday but on the dollar side, we have the Consumer Price Index (CPI) and the Core version of the same indicator, both considered to be main gauges of inflation. The forecast is a 0.8% increase for the CPI and 0.5% for the Core version. Both indicators are scheduled for release at 1:30 pm GMT.
The economic week finishes with the Preliminary UoM Consumer Sentiment survey, scheduled for Friday at 3:00 pm GMT. This is a leading indicator of financial confidence among consumers and has a medium impact on the US Dollar. Readings above the forecast of 61.3 can strengthen the currency.
Technical Outlook – EUR/USD
The Euro is free-falling against the USD and has exited the long-term diagonal channel that has confined the pair since mid-2021. Bearish momentum is in full swing and it looks like there is still room to go down, especially if the military conflict doesn’t show signs of slowing down.
It should be noted that the RSI has already entered oversold territory, which usually means that a pullback will follow. However, the position of this indicator cannot be considered a signal to buy on its own, and looking at the MACD we can see that its lines are wide open, meaning that bearish pressure is still in full swing.
The levels to watch are 1.0775, a level that last acted as support in May 2020, and the lower border of the diagonal channel (which can act as resistance). Volatility is high and can further increase at any moment, thus caution is a great tool to use during this period.
