Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.1260.
- Add a stop-loss at 1.1400.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.1330 and a take-profit at 1.1400.
- Add a stop-loss at 1.1260.
The EUR/USD pair continued the downward trend that started on Friday as investors watched the rising risks of a Russian invasion of Ukraine. The pair is trading at 1.1323, which is about 1.50% below the highest point last week.
Ukraine TensionsRrise
Tensions about Ukraine continued during the weekend as Western countries warned that Russia was about to invade the country. According to the Wall Street Journal, Russian proxies in Eastern Ukraine continued to mobilize during the weekend. In a separate statement, Joe Biden warned that Putin appeared set to attack any time soon.
The invasion is usually bearish for the EUR/USD for two main reasons. First, an invasion will lead to higher cost of energy, which will lead to a challenging situation for the European economy. For one, Russia is the biggest source of European energy.
Second, it is bearish since the US dollar is usually a safe-haven currency that does well when global tensions rise.
Later today, the key catalyst for the pair will be the latest flash manufacturing and services data from the European Union (EU). Economists expect the data to show that the French manufacturing and services PMIs increased to 55.5 and 53.6 in January. Similarly, in Germany, they see the two PMIs rising to 59.5 and 53.0, respectively. For the region as a whole, analysts expect that the two PMIs rose to 58.7 and 52.0.
Another important data to watch will be the latest producer price index (PPI) data from Germany. The data is expected to show that the headline PPI rose to 1.5% on a month-on-month basis and by 24.2% on YoY basis.
The volume of the pair will be a bit limited today since the US markets will be closed for President’s day celebrations.
EUR/USD Forecast
The four-hour chart shows that the EUR/USD pair has been in a bearish trend in the past few days. It has dropped by about 1.50% from its highest level last week. It has moved below the 25-day and 50-day moving averages (MA). The pair also crashed below the Ichimoku cloud while the Relative Strength Index (RSI) has been in a bearish trend.
Therefore, there is a likelihood that the pair will continue falling as bears target the next key support level at 1.1260.
