EUR/USD has been trading lower for 5 days straight. The sellers wrecked a two-year low, having pushed the pair to 1.0822. The buyers enter the market, but we're dealing with nothing but a short-term upward correction. The level of 1.07 will be challenged sooner or later. This is just a question of time against the fundamental background for EUR. A further scenario is obvious. EUR/USD is doomed to weakness as the US dollar is winning favor with investors as a safe haven asset while the euro is weighed down by severe geopolitical factors amid a robust rally in the commodity market. As a result, EUR/USD is sliding without any obstacles.
Now let's try to figure out what price retracements could be used as an excuse to open short positions. The buyers are longing for any positive outcome in the Russia – Ukraine talks today. However, the parties will hardly reach any ceasefire agreement. A lot of sources indicate the following items on agenda today: 1) humanitarian corridors, 2) swap of war prisoners, 3) deployment of international organizations on territories occupied by the Russian military. The parties are not going to discuss other key issues, including compromise decisions and an actual truce.
This is just an inside information from sources close to the negotiating groups. We should not rule out the option of notable progress in the context of possible de-escalation. By and large, bearing in mind the rhetoric of Russian and Ukrainian delegates, unfortunately investors can hardly rely on any breakthrough in the talks. From my viewpoint, there is the other piece of information that deserves attention. Citing Turkey's Minister of Foreign Affairs, Russia's Minister of Foreign Affairs Sergey Lavrov and his Ukrainian counterpart Kuleba are due to meet on March 10 in Antalya at the diplomatic forum.
Importantly, earlier Turkey's President Recep Tayyip Erdogan reiterated that his country would gladly contribute to the settlement of the military conflict. Besides, in the direct phone call with Vladimir Putin, the Turkish leader passed the message from Ukraine's President Volodimir Zelenskyy about his readiness to the face-to-face talks. In turn, Putin's Spokesman Dmitriy Peskov stated that Russia can withdraw its military operation anytime provided that Kyiv fulfils Russia's terms. In particular, Moscow requested to make amendments to the Constitution and deny any intentions of entering any political block. Another ultimatum is that Ukraine should acknowledge the Crimea to be part of the Russian Federation. On top of that, the Kremlin insists that Kyiv should acknowledge the sovereignty of the Donetsk and Lugansk self-proclaimed republics. It is known that Ukraine is ready to acknowledge its neural status, but at the same time it flatly rejects the recognition of the Crimea as Russia's region and the sovereignty of the Donetsk and Lugansk regions.
For the time being, it is what exactly the heads of diplomatic departments will talk about in Turkey. In addition, the parties have not yet officially agreed to the meeting.
This suggests that the panic that is currently setting the tone on the financial markets will continue to play on the side of the EUR/USD bears. At least in the coming days. In general, almost all fundamental factors play in favor of the further development of the downtrend.
The commodity market is also putting pressure on the EUR/USD pair. The cost of gas at the opening of trading on the ICE exchange for the first time ever exceeded $3,000 per thousand cubic meters. Moreover, during the day, the price continued to break records: at the time of writing these lines, the cost of "blue fuel" topped $3,700 per thousand cubic meters. The market mood has not changed after the statement of the Minister of Finance of Germany, Christian Lindner, who opposed the embargo on the purchase of Russian oil, coal and gas. He noted that it would be "extremely difficult" to find an alternative to Russian energy resources, and warned of possible power outages next winter. The rhetoric of a high-ranking German official was simply ignored. By the way, the black gold market also surprises with records. In particular, the price of Brent oil has reached a record value since 2008 - $140 per barrel.
Against the backdrop of such an information flow and a possible stagflationary shock, the euro is losing ground against the greenback. If today's talks do not end with a truce (unfortunately, the likelihood of such a scenario is quite high), the single currency will again extend its losing streak.
From a technical point of view, the pair is also under significant pressure, and on all "higher" timeframes. On the 4-hour, daily, weekly, and 5-minute charts, the pair is below the lower border of the Bollinger Bands indicator, which indicates the priority of the downtrend. The pair demonstrates a clear-cut bearish trend, which is confirmed by the main trend indicators, Bollinger Bands and Ichimoku, which has formed its strongest bearish signal Parade of Lines on all the above timeframes. All indicator lines are above the price chart, thereby demonstrating pressure on the pair. The immediate target of the downward movement is the level of 0.0800, a psychologically important, "round" support level.
