USD in demand, while tensions are increasing

Author: Trade Pro Skills

Monday, 21 March 2022 Number of words: 369 Study time: 2 Minutes Views: 76


EU leaders and Biden are scheduled to meet

Market analyst – IFC Markets

The US dollar safe-haven demand still leading its bulls, as the tensions continue on Monday while the Russia-Ukraine war still cannot see the light at end of the tunnel. Market risk even increased higher after Ukraine refused to surrender the embattled southern port city of Mariupol as Russia warned of humanitarian 'catastrophe’. 

As the tensions continue, hopes for diplomacy have seen over the weekend are gone. On top of that, US President Joe Biden and China’s President Xi Jinping could not agree on the Russia-Ukraine conflict and how to respond, and Biden warned China of consequences if it supported Russia’s invasion of Ukraine, which is not read as a positive signal by political analysts. 

On the banking front, after that last week FED increased the rates by 0.25%, earlier today, the People’s Bank of China (PBOC) refrained from cutting the mortgage lending rates, leaving them unchanged in the first quarter of this year. Market reaction was natural on that.

Today, in the absence of important economic data focus turns to the EU leaders, and Biden meeting to firm up the West's response to Moscow.

Heading into the North American session, the S&P 500 futures raised 1.2% ahead of cash market opens, Dow Jones gaining 0.8% and NASDAQ is up more than 2%, while US 10-years bond Yields is above 2.2%. Increasing Yields at the moment, causing the US dollar's bulls also to increase and put the Euro under pressure. Higher risk in Europe, decreasing the hopes on faster economic recovery in this block and raising the Yields in the States, puts that in sell, against US dollar. Therefore EUR/USD loses its recovery momentum and turns back into the red zone below 1.1050. The shared currency ignores hawkish comments from ECB policymaker Robert Holzmann, as he argued for a rate hike.

From the technical point of view, in all main charts Euro is under pressure against the USD. As you can see in the bellow daily chart, EURUSD under key resistance at 1.1225 is clearly under pressure, moving mostly between the middle, and lower bands of BB. Increasing market volume in the clear downtrend also increased the bears' power. Overall, technical indicators also remain bearish.

USD in demand

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