Traders had difficulty choosing the direction of the EUR/USD pair on Friday. There was conflicting information about what is happening in Ukraine. Will attack, will not attack and who will attack - it is difficult to understand. Judging by a number of statements by Russian officials, the situation in Donbas is becoming potentially dangerous, news from the region is alarming.
On Friday, more than 80 violations of the ceasefire regime were recorded on the contact line in eastern Ukraine, Foreign Minister Sergei Lavrov said, citing an OSCE report. At the same time, Thursday's clashes were the largest since 2015.
On Friday, the DPR announced the mass evacuation of the population from the self-proclaimed republic, as there was a threat of invasion by Ukraine. According to the head of the DPR Denis Pushilin, the Rostov region of the Russian Federation is ready to accept and accommodate people. This news contributed to the deterioration of the risk appetite that appeared at the beginning of the session. Demand for the dollar as a protective asset has grown, while short positions have begun in the EUR/USD pair.
The euro needs to get out of the range of 1.1350-1.1400 to determine the next short-term movement vector. It looks like it will happen at the end of the week. What is happening now is fueling the mood to sell the euro, the events of next week can only strengthen them.
Moscow will hold exercises near Ukraine on Saturday, which will be another demonstration of military power. The event is not commented on in any way, except that it was planned a long time ago, completely transparent and impossible without the participation of the president. However, everyone can interpret the teachings in their own way. The United States continues to talk about the inevitability of a Russian invasion of Ukraine, while Russia denies this fact. At the same time, a document published by the Foreign Ministry on Thursday talks about possible military actions if NATO does not satisfy the requirement that Ukraine should never be allowed to join the alliance.
A new meeting of US Secretary of State Anthony Blinken with Sergey Lavrov will take place next Thursday. The parties should try to resolve the crisis. Meanwhile, US President Joe Biden is set to hold a meeting on the Russian-Ukrainian conflict with the leaders of Canada, France, Germany, Italy, Poland, Romania, the UK, the EU and NATO on Friday.
The West has not yet confirmed the escalation of the conflict, but everything is coming to that. The strengthening of geopolitical risks may complicate the recovery of EUR/USD, while providing an impetus for the dollar's growth.
The dollar index was trading in a narrow range at the end of the trading week, followed by a sharp surge in demand. The short-term outlook for the dollar index remains positive. Analysts do not rule out the possibility of further growth above the 96.00 mark. The next resistance is at the weekly high at 96.43.
This week, the dynamics of the foreign exchange market was mainly supported by geopolitical news. However, according to experts, the dollar is also supported by expectations of a Federal Reserve rate hike. Some investors are anticipating an increase in it in March by 50 basis points at once.
Such assumptions will be supported by the nearest macro statistics, which is expected to be strong. The second estimate of US GDP growth will be released on Thursday, the forecast was 7% against 6.9% according to the first estimate.
The dollar's growth on Friday is also related to statistics. The number of home purchase and sale transactions in the secondary market increased in January by 6.7% compared to December, while analysts expected a decrease in the indicator.
