The euro-dollar pair ended the week on a minor note, once again not staying within the 10th figure. A surge in anti-risk sentiment has strengthened the greenback’s position, while the euro continues to follow the quoted currency. Dollar bulls won the local battle, but were unable to reverse the overall situation in their favor. Geopolitical uncertainty forces traders to be extremely cautious and circumspect. Actually, that’s why the EUR/USD pair is actually marking time, despite the increased intraday volatility.
In general, the last trading week was characterized by interesting circumstances. Firstly, the pair has formed a price range of 1.0960-1.1050, within which market participants demonstrate their “emotions”. That is, if the level of anti-risk sentiment in the market increases, the pair goes to the lower limit of the specified echelon, if the market resumes craving for risky assets, the price goes to the upper limit of this range. But at the same time, neither bulls or bears dare to leave this range, no matter how significant the corresponding fundamental factor.
Another interesting point is that the pair was “marked” literally every day of the week both at the upper border of the 1.0960-1.1050 range and at the lower one. On the one hand, such stable price fluctuations allow traders to trade from the borders of the echelon, “turning over” positions like an hourglass. On the other hand, traders now focus mainly on geopolitical fundamental factors that are a priori unreliable and poorly predictable. Therefore, at the moment it is impossible to say with certainty that the pair will be trading within the above-mentioned range for a long time.
The central event of last week was the extraordinary NATO summit, which took place in Brussels. Taking into account the information vacuum that has formed around the negotiations between Russia and Ukraine, the focus of the market’s attention has shifted to the meeting of the Alliance members, especially against the background of the “European tour” of US President Joe Biden. The rumors and statements preceding this event increased the degree of heat in the foreign exchange market. In particular, currency strategists discussed the idea of Warsaw to introduce a NATO peacekeeping contingent to the territory of Ukraine. Given Moscow’s position on this issue, analysts have suggested that the approval of this scenario will lead to a significant escalation of the situation in Eastern Europe. Against the background of such rhetoric, the dollar was in high demand, acting as a protective instrument. It cannot be said that panic moods dominated the market: most of the relevant experts were confident that the North Atlantic Alliance would reject the proposal of the Poles. However, some tension was still present, allowing EUR/USD bears to test the area of the ninth figure.
As you know, NATO members really did not support the proposal of the Polish side. The Secretary General of the organization, Jens Stoltenberg, stated without any ambiguity that “the Alliance will not deploy troops on the territory of Ukraine.” This fact allowed the EUR/USD bulls to organize a counteroffensive, being marked at 1.1045.
However, as mentioned above, according to the results of the past week, neither bulls or bears of EUR/USD were able to determine the priority direction of movement. But if we compare the opening/closing price, we can come to the conclusion that the bears of the pair won a tactical victory. So, if on Monday the pair started trading at 1.1051, then on Friday the trading ended at 1.0961. As you can see, even here traders clearly marked the boundaries of the price range within which they traded for five days.
And yet, at the moment it is impossible to say that bears have any advantage. The pair dropped to the lower limit of the echelon, reacting to the comments of the head of the Russian delegation at the talks, Vladimir Medinsky. He said that the positions of Russia and Ukraine “are converging on minor issues, but on the main ones they are marking time.” Such a signal allowed the safe dollar to strengthen its positions again. But at the same time, market participants did not leave the price range that was formed during the week. This suggests that there was no “downward breakthrough”: traders only played a temporary strengthening of the US currency.
It is obvious that next week all attention will be focused on Ukraine, or to be more precise, on the Russian-Ukrainian negotiations. Despite the information vacuum that has formed around the negotiation process (which is quite understandable and justified), the parties sometimes still make relevant statements. Unfortunately, it is impossible to predict or predict the dynamics of negotiations. At the same time, in my opinion, EUR/USD traders will continue to express their “emotions” within the 1.0960-1.1050 range – up to the announcement of any specific political decisions based on the results of the negotiation process.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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