Macroeconomic fundamentals have finally receded into the background. For example, today traders of the EUR/USD pair ignored the contradictory PMI reports. The indices of business activity in the manufacturing sector (both German and pan-European) came out in the "red zone", reflecting the slowdown in this area of the economy. But in the service sector, on the contrary, positive dynamics were recorded, both in Germany and in Europe as a whole. However, market participants did not pay any attention to this release - the pair today reacts only to the news flow of a geopolitical nature.
It is worth noting that the information flow around Ukraine is changing with kaleidoscopic speed. Traders' cautious optimism alternates with increased concern about a possible military conflict. The statements of the top officials (or rather, their representatives) are encouraging - the parties still do not rule out a diplomatic way to resolve the problem. At the same time, the information coming from Donbas indicates further escalation. Such a contradictory fundamental background keeps traders "on their toes": the price demonstrates impulsive short-term drawbacks that fade as soon as they begin. In general, the EUR/USD pair remains within the 13th figure, where it ended the last trading week.
The morning started with good news: According to the Elysee Palace, Putin and Biden accepted the proposal of French President Macron to hold a summit on security and strategic stability in Europe. Questions for the summit of the presidents of Russia and the United States should be prepared by Lavrov and Blinken at a meeting on February 24.
The beneficiaries of this news were the buyers of EUR/USD: the craving for risk increased markedly, while the safe dollar was under background pressure. As a result, the pair approached the boundaries of the 14th figure, updating the 5-day high. However, CNN later reported that the White House had not confirmed the holding of the above-mentioned summit. The information on this subject is contradictory, so the demand for the US currency began to grow again - in the afternoon, the pair returned to the base of the 13th figure.
In addition, today the heads of the LPR and the DPR appealed to Russian President Vladimir Putin with a request to recognize the independence of the republics, suggesting along the way to consider the possibility of a cooperation agreement with Russia - in particular, in the defense sphere. Before that, on February 15, the State Duma of the Russian Federation voted to send an appropriate appeal to the president with a request to recognize these self-proclaimed republics. Vladimir Putin himself, opening an extraordinary meeting of the Security Council today, accused Kyiv of not intending to implement the Minsk peace agreements. In this context, the Russian leader said that Russia should consider recognizing the independence of the LPR and the DPR. All participants of the Security Council voiced their opinion, and they all spoke "for" the recognition of the legal personality of the respective territories. Following the meeting, Vladimir Putin said that a decision on this issue would be made "later, but today."
According to several political analysts, the recognition of the LPR/DPR will bring to a new level an indirect dialogue between Kyiv and Moscow and a direct dialogue between Moscow and Washington (mediated by Paris). In any case, today's events will only indirectly affect the positions of the EUR/USD pair. If representatives of the United States and the Russian Federation still announce preparations for the leaders' meeting (having previously confirmed the meeting of Foreign Minister Sergey Lavrov with US Secretary of State Anthony Blinken), market participants will be waiting for the results of this summit.
In such conditions, it is risky to open any positions on the EUR/USD pair: after Moscow's decision today, comments from high-ranking officials of the leading countries of the world, NATO, the European Union, etc. will follow. They will likely be quite sharp, condemnatory: in this case, anti-risk sentiment in the market will significantly increase. On the other hand, Washington may still insist on a diplomatic solution to the situation, especially in the context of Joe Biden's words about the "need for compromise" (as you know, compromise, in this case, implies concessions, including from Kyiv). If contrary to Russia's recognition of the LPR/DPR, the United States does not refuse to hold a security summit in the European region, the euro can "shoot" across the entire market, including in pairs with the dollar.
From the point of view of technology, the situation is also uncertain. The EUR/USD pair on the daily chart is located on the middle line of the BB indicator, under the Kumo cloud, but between the Tenkan-sen and Kijun-sen lines. In other words, trend indicators do not signal any priority: the pair is at a crossroads. Moreover, at the moment (and, obviously, in the coming days), the tone of trading will be set by geopolitical factors, and not by "classic" macroeconomic ones. Therefore, today it is advisable to take a wait-and-see position on the EUR/USD pair.
