Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.1265.
- Add a stop-loss at 1.1400.
- Timeline: 1 day.
Bullish View
- Set a buy-stop at 1.1360 and a take-profit at 1.1420.
- Add a stop-loss at 1.1300.
The EUR/USD pair was little changed in the evening session as the crisis in Europe continued and after the positive European Union data. It is trading at 1.1343, where it has been in the past few days.
Ukraine Crisis
The euro is exposed in the ongoing conflict between Russia and Ukraine. On Monday, Russia said that it killed five Ukrainians who had moved to its territory. Western countries warned that Russia was likely staging a false flag in a bid to enter.
All indications are that Russia will soon invade the country, which will have a negative impact on the Eurozone economy. For one, it could lead to disruption of energy flows from Russia to European countries like Germany.
In addition, because of the role of Russia in the global oil market, European countries will see the additional cost of energy at a time when inflation is soaring.
The EUR/USD reacted mildly to the flash manufacturing and services numbers from the Eurozone. Data by Markit showed that the two sectors of the economy did well in February as more countries reopened. The two PMIs were at 58.4 and 55.4, respectively.
The data came two days after the ECB chief economist shifted his tone on inflation. In a statement, Philip Lane said that he expects that inflation will remain at elevated levels for a while. He expects that the headline CPI will remain above 2.0% in the next two years.
Previously, he believed that the current phase of inflation was transitory and that it will fall back to the bank’s target of 2.0% this year. Therefore, there is a likelihood that the ECB will embrace a more hawkish tone in its battle against inflation. Later today, the pair will react to the latest American consumer confidence data.
EUR/USD Forecast
The four-hour chart shows that the EUR/USD pair has moved sideways in the past few sessions. It is trading at 1.1337, which is about 55 basis points below its highest point on Thursday last week. It also moved slightly below the 25-day and 50-day moving averages and the 38.2% Fibonacci retracement level.
Therefore, the pair will likely continue falling as bears target the next key support level at 1.1280, which was the lowest level this month. This view will be invalidated if the pair moves above 1.1365.
