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Euro Suffers Amid Geopolitical Tensions

Published 04/12/2022, 08:43 AM
Updated 06/09/2021, 02:00 AM

The euro barely breathed a sigh of relief following the results in the first part of the presidential race in France, as market sentiment dramatically reversed.

The currency started to incur losses long before the opening of the North American session. Eventually, it returned to the levels it traded at the beginning of the day. The plunge came after Belarus accused Poland of attacking its border. The news was later confirmed by Russia.

The level of tension instantly skyrocketed. Investors immediately rushed to sell the euro, fearing an even more significant escalation of the conflict and a direct clash between NATO and Russia. Although it remains unclear what has happened there, tensions keep escalating, harming the euro.

The situation will clear up with time. After all, the parties are now looking for ways to ease tensions as quickly as possible. Meanwhile, data on the US inflation rate will be released today during the North American session. Consumer prices are estimated to accelerate to 8.3% from 7.9% in the previous month. However, figures may well come in higher than forecast.

Despite monetary policy tightening initiated by the US Federal Reserve, record inflation has already had a destructive effect on the American economy. In this light, the euro may somewhat recover.US CPI inflation.

EUR/USD slowed its downtrend move, bounced to support in the range of 1.0800/1.0835, and came to a standstill. Despite a decrease in the volume of short positions, the bearish bias is still strong as the price has recovered from its recent corrective move.

The Relative Strength Index (RSI) bounced offline 50 on the 4-hour chart, signaling increased bearish bias. The Alligator indicator reflects a bearish cycle on the 4-hour and daily charts, with its MAs moving down.

Outlook

On the 4-hour chart, consolidation below 1.0800 would signal the continuation of the bearish trend in the medium term. Resistance is seen at 1.0935, where the price is likely to fluctuate before consolidation occurs. In case the quote settles above 1.0940 on the 4-hour chart, we may expect the beginning of a corrective move from support.

If so, the price may head towards the psychological level of 1.1000. In terms of complex indicator analysis, there is a mixed-signal for short-term and intraday trading due to a flat market. In the medium term, indicators are signaling to sell the pair because of the downtrend. 

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