Euro Edges Up as Ukraine Crisis Subsides
Biden And Putin Are Set to Meet… “In Principle”
by Bogdan Giulvezan
The European bloc’s single currency rallied on Monday as news transpired of a potential Biden – Putin meeting. If such a summit does indeed happen, it could ease off the Ukraine crisis but while this may or may not materialise, what is certain is that the Euro gained some ground against the US Dollar, and the US Dollar Index (DXY) fell almost 0.30% at the time of writing
It seems like investors are pulling their funds out of safe-haven assets such as the greenback, looking for riskier trades. Also, the expectation of a 50 bps rate hike at the Fed’s March meeting has dropped among market participants, as Fed officials have called for a gradual tightening.
The Biden – Putin meeting is not set in stone and many details are missing but according to the office of French President Emmanuel Macron, the aforementioned Presidents have agreed to meet to discuss “security and strategic stability in Europe”. According to The White House, U.S. President Biden accepted the summit “in principle” and “if an invasion hasn’t happened”. It remains to be seen if the meeting will actually take place and if it will solve any problems.
Key Events for the Week Ahead
Today U.S. banks are closed in observance of Presidents’ Day, so the greenback will not be affected by any economic releases. The German Flash Services PMI released earlier today exceeded expectations, strengthening the Euro’s bullish momentum.
Tuesday at 2:45 pm GMT, the U.S. Manufacturing and Services PMIs will be released, showing the opinions of purchasing managers about the respective sectors. The impact of these indicators is not huge but US Dollar strength can be usually seen if the actual reading exceeds expectations.
Thursday we remain focused on the greenback for the release of the U.S. Preliminary GDP, scheduled at 1:30 pm GMT. There are three versions of the GDP (Advance, Preliminary, and Final), with the first being the most important; however, readings above forecast can strengthen the USD, since the GDP is the main gauge of an economy’s performance.
We finish the week with the release of the Core PCE Price Index, which is scheduled for Friday at 1:30 pm GMT. This is rumored to be Fed’s preferred inflation measure, thus it has a hefty impact on the dollar and it should be closely watched.
Technical Outlook – EUR/USD
Currently trading at 1.1360, the pair is now in control of the Euro bulls but from a long-term perspective, it is still in a downtrend. The US Dollar recently failed to take the pair below the 50 days Moving Average and below the upper barrier of the diagonal channel, which indicates that we will see additional moves up in the short term.
The MACD and RSI are both neutral and price action is relatively choppy but there’s a good possibility that the pair will climb into 1.1430 resistance. A lot will depend on how the Biden – Putin meeting goes but at the moment nothing is clear, thus caution is advised.
