Today's events are of great importance not only for the foreign exchange market, but also for the financial world as a whole. The increased volatility of dollar pairs is fully justified, given the significance of the geopolitical theses voiced in Turkey. It is still too early to talk about comprehensive solutions, but the first steps in this direction have clearly already been taken. The reaction of the market was not long in coming, as all the attention of traders was focused on the Russian-Ukrainian negotiation process.
So, let's start with the main thing. Contrary to general skepticism, today's round of talks between Russia and Ukraine ended on a positive note. The parties have made significant progress, perhaps for the first time since the start of the interstate dialogue. After the announcement of the first results of the meeting, the euro-dollar pair shot up sharply, reflecting a significant decline in anti-risk sentiment in the foreign exchange market. In just a few hours, the pair jumped by more than 150 points, testing the 11th figure.
Let me remind you that the EUR/USD pair was trading in the 1.0960-1.1050 range for a week and a half, alternately starting from the boundaries of this price range. Traders were cautious and did not dare to launch large-scale attacks - neither in the direction of the upside, nor in the direction of the downside. Even the nervousness about the extraordinary NATO summit could not "push" market participants beyond the above range. The market was in anticipation of Russian-Ukrainian negotiations and any concrete decisions - a breakthrough or a failure. The intrigue on this issue persisted until the last minute, although the very fact that a face-to-face meeting (for the first time since March 7) will be held indirectly indicated that the parties could agree on some fundamental foundations for a future agreement. And so it happened: for the first time in the entire negotiation process, the participants in the dialogue outlined practical steps towards reaching a compromise.
In particular, the head of the Russian delegation, Vladimir Medinsky, said that the talks between Russia and Ukraine were constructive. At the same time, he added that the Russian side will consider the Ukrainian proposals. Medinsky also suggested that a meeting between the presidents of Russia and Ukraine "is possible simultaneously with the initiation of the treaty between Russia and Ukraine at the level of the Foreign Ministry." According to the head of the Russian delegation, under the condition of quick work on the agreement and finding a compromise, the possibility of concluding a final agreement "will become closer."
Of course, it is still too early to talk about any final chords. At the same time, it can be said with confidence that the results of today's talks have become a breakthrough, despite the general skepticism on the part of many experts and political scientists. And here it is important to emphasize that both representatives of the Russian side and the Ukrainian side are talking about the actual breakthrough.
But - I repeat - until the final agreement is initiated, traders will be in limbo, which may affect the growth prospects of the EUR/USD pair. On the one hand, bulls managed to overcome the upper limit of the established range of 1.0960-1.1050 today. On the other hand, the EUR/USD bulls could not confidently settle within the 11th figure. As soon as the upward momentum began to fade, traders began to take profits, thereby exerting background pressure on the pair. Given this fact, we can assume that in the short term the price will return to the area of the above range, but the mood for the pair will remain bullish.
That is, if last week the pair was trading at the lower boundary of the echelon, then in the medium term it will be in the area of the upper boundary - in the middle of the 10th figure. After all, we must not forget that the parties still need to overcome a certain path of agreeing on a future treaty, having crystallized a common position on many subparagraphs. Thus, according to the representative of the Ukrainian delegation, the date of the next round of negotiations will become known "after improvements in the subgroups and Russia's reaction to the concept of a general agreement." According to Russian media, further, until a certain point, the negotiations will continue in video format. It should also be noted that, according to Medinsky, Russia will put forward counter initiatives after considering Ukraine's proposals.
Thus, EUR/USD bulls today got a pretext for their large-scale offensive, which resulted in the assault on the 11th figure. However, whether traders will be able to settle in this price area is an open question. Therefore, despite the renewed craving for risky assets, it is too early to talk about prioritizing long positions on the pair. If the EUR/USD bulls do not stay above 1.1100, then there is a high probability of a decline to the 1.0960-1.1050 range. Given this risk, in the short term, it is best to take a wait-and-see position, watching the price action in the area of the 11th figure. If traders hold this high, then the next growth target will be 1.1170, which is the Tenkan-sen line on the W1 timeframe.
