EUR/USD is moving without a clear trend, balancing between 1.0900 and 1.1000 as bears and bulls try to steer the pair in their favor. The pair tested 1,0961 today but returned above 1.1000 afterwards, as bears failed to overcome the efforts of bullish traders. The pair's price dynamics remain volatile amid uncertain reports on peace talks between Russia and Ukraine. Another factor influencing the quote is Joe Biden's European trip this week.
Negotiations between Russia and Ukraine remain in the headlines. Yesterday's talks, which were conducted via video link and lasted an hour and a half, failed to produce any results. With no reports coming in, traders are becoming increasingly risk-averse – there is nothing that would renew last week's optimism in the market. Furthermore, according to some reports, both parties have agreed not to comment on the peace talks until Russia and Ukraine come to a definite compromise.
This is reasonable from a political point of view – such talks must be conducted without any pressure. However, due to a lack of information, traders in the foreign exchange cannot assess the current situation objectively to make trading decisions. At the same time, they cannot ignore this fundamental factor, which is the most important at this moment.
Some reports from Ukraine do manage to influence EUR/USD, however. Ukrainian president Volodymir Zelensky has stated Ukraine could declare its military neutrality as a compromise position. NATO is in no hurry to admit Ukraine, while Russia is strongly against any eastward expansion of the alliance. Earlier, the head of Russian delegation Vladimir Medinsky stated Russia and Ukraine made significant progress on discussing the country's neutral status. No comments were given on other issues being discussed. Yesterday, Zelensky stated amendments to Ukraine's constitution and territorial changes should be approved by a referendum.
These reports prevent EUR/USD bears from pushing the pair towards 1.0900, as the slightest hint of a compromise is enough to send the pair back upwards.
Continuing uncertainty, hawkish comments by Fed officials, including Jerome Powell, and the planned European trip by Joe Biden is giving support to the US dollar. The visit by the US president could provoke more volatility, thus increasing risk-off sentiments. Biden is set to visit Brussels, followed by a visit to Poland.
The purpose of Joe Biden's trip could be convincing the EU to reduce Russian oil and gas imports, Politico reported yesterday. Earlier, several EU officials stated European countries would have to reduce natural gas imports from Russia by two-thirds (100 billion cubic meters). However, Politico noted this plan was highly unlikely to succeed, as US LNG production could not make up for the lost Russian supply. Furthermore, Biden cannot order US companies to re-orient from Asian markets into the European market. There are also economic and political factors that make EU unwilling to make such a decision, Politico concluded.
Nevertheless, Biden's rhetoric could give support to USD as a safe haven asset by boosting risk-off sentiments.
At this moment, taking a wait-and-see attitude could be the best course of action. Despite the overall bearish mood, the pair cannot hold in the 1.0900 area, which is a rather alarming sign for bears. The pair would eventually move in one clear direction or another, but at this point, the situation is very uncertain.
