The euro/dollar pair continues to update price lows. The rate of decline has been particularly active lately - every day EUR/USD bears absorb one figure. The day before yesterday, sellers stormed the seventh figure, yesterday - the sixth. Today, they have already settled within the fifth price level. The last time the price was at such lows was in 2017 when the Federal Reserve declared a more aggressive approach to raising the rate.
Looking ahead, it can be noted that this year the southern trend is largely due to similar reasons. The American regulator acts as a reliable ally of the greenback, allowing it to dominate the entire market. As for the EUR/USD pair itself, the market has already cautiously started talking about parity, although in my opinion, it is too early to talk about such prospects. On the other hand, the pair is rapidly diving down: in three months, the price has decreased by almost a thousand points. Therefore, the option of parity cannot be completely excluded. Dollar bulls have too many trump cards, while the euro is under pressure from numerous fundamental factors.
And yet, the EUR/USD pair is falling primarily due to the strengthening of the greenback. The US dollar index is near two-year highs. Today, it has already tested the 103rd figure - for the first time since March 2020. Figuratively speaking, dollar bulls have collected a "royal flash": almost all fundamental factors play in favor of the greenback.
First of all, there is a complex and tense geopolitical background on the dollar's side. The protracted Russian-Ukrainian negotiations have so far failed to bring any tangible results. According to media reports, the work of the delegations is carried out at the level of legal subgroups, but no one is ready to say now when the next face-to-face meeting of the main group will take place. Today, the Turkish Defense Minister announced a possible meeting of the presidents of Russia and Ukraine "in the near future," but there are no official signals about this yet.
There is also unrest in East Asia. The other day, US Secretary of State Anton Blinken said that the United States plans to provide Taiwan with everything necessary "to protect against any potential aggression." China was outraged by the very fact of arms supplies, and the wording used in this case. The Chinese Foreign Ministry reminded the US administration of the observance of the one-China principle. Representatives of the Chinese Ministry of Defense voiced tougher statements to Washington, and directly to the administration of Taiwan.
The Celestial Empire reminded of itself in another aspect. As you know, China remains one of the few countries that adhere to the policy of "zero tolerance" to coronavirus. Therefore, due to several dozen identified cases, the 25-million Shanghai was closed for quarantine at the end of March. Today, there was information that Beijing could be "closed" after Shanghai for quarantine. The country's authorities have already warned of an increase in the number of coronavirus infections in the capital. Local officials called the situation "gloomy and difficult", but so far they have limited themselves to local quarantine measures, within several blocks of Beijing.
In addition, the first case of human infection with H3N8 avian influenza was recorded in China yesterday. It should be noted here that birds, horses, dogs, and seals are infected with this flu virus, but not people. Previously, H3N8 could not infect people. And although experts believe that this case is an isolated one (i.e. the widespread of the virus is unlikely), this fact has alarmed many people, including in the foreign exchange market.
In other words, the safe dollar continues to be in high demand as a protective tool. Also, the greenback continues to gain momentum due to the strengthening of hawkish expectations. It is exactly a week before the announcement of the results of the Fed's May meeting, so the trading principle "buy on rumors" is now working on the market. The rumors about two or three 50-punt rounds of rate hikes are based on statements by most representatives of the Federal Reserve. Now they observe the "silence regime" (10 days before the meeting), but earlier they voiced unequivocal hawkish messages, the essence of which is their readiness for aggressive actions in the context of tightening monetary policy.
All this suggests that the dollar is quite reasonably gaining momentum, while the euro is not capable of counterattacking. The single currency is under strong pressure (energy crisis, stagflation risks, geopolitical tensions), so it is impossible to talk about any turning point at the moment.
The technical picture also speaks about the priority of the southern movement of EUR/USD. On all, without exception, in the "older" timeframes (from H4 and above), the pair is located under the lower line of the Bollinger Bands indicator and under all the lines of the Ichimoku indicator, which formed a strong bearish "Line Parade" signal (except MN). This indicates a clear advantage of the downward movement. The nearest targets at the moment are 1.0500 and 1.0450. If we talk about longer-term prospects, then there is already a multi-year price minimum of 1.0340, which was reached in January 2017. Sales are a priority, so corrective pullbacks are still advisable to use to open short positions.
