Euro finds its feet

The euro has been having a rough time of late and plunged 2.96% last week. EUR/USD started the week with more losses but finally found its feet today. In the North American session, the euro is up 0.36% and is trading just shy of the 1.09 level.

Markets calm, but for how long?

The fighting in Ukraine and the massive refugee crisis is only getting worse and crude oil prices continue to rise, but there is a sense of calm in the market, which has seen the euro reverse directions. With all the bad news out there, there is a feeling that the calm is deceiving and won’t last very long. My colleague at OANDA Jeffrey Halley has aptly termed the current quiet as the ‘eye of the hurricane’ – the period of calm before the storm returns.

Sanctions against Russia are moving ahead full-throttle, at least in the United States. Later today, President Joe Biden is expected to announce a ban on Russian imports of oil, energy and coal. The move is not as dramatic as it may sound, as the US only imports about 8% of its energy needs from Russia, and only 3% of its oil. Tellingly, the Europeans are not joining in this move, as Western Europe imports some 40% of its natural gas from Moscow. Still, the US energy ban will tighten the screws on Russia that much more as the West continues to disengage from Russia in response to its brutal invasion of Ukraine.

The Fed is poised to raise interest rates next week, in what will almost certainly be a 25-basis point hike. What the Fed does after that is unclear, as the Ukraine war and skyrocketing oil prices could see the Fed raise rates at a slower pace than it had intended. The markets were expecting up to six rate hikes this year, but with a war raging in Europe, all bets are off.

.

EUR/USD Technical

• There is resistance at 1.1021 and 1.1156
• EUR/USD tested a major support level at 1.0796 on Monday. Below, there is support at 1.0661

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.