- The EUR/USD finished Friday’s trading near the 1.03738 ratio as the month of February finished.
- The EUR/USD began February around the 1.03560 ratio and saw a violent opening on the 3rd of February which took the currency pair to a low around the 1.02100 vicinity.
- This big drop in value starting the month was caused by talk about Trump tariff policy.
- This past Friday’s trading saw a high around the 1.04200 ratios, Wednesday upwards trajectory took the EUR/USD to within sight of the 1.05300 level.
Most traders know things changed in the middle of this past week when the U.S reported slightly higher inflation which caused the USD to get a bit stronger. Yet the obvious climax was delivered this past Friday when Ukraine’s President Zelensky and U.S President Trump literally got into an argument in the White House. The EUR/USD dropped immediately, traversing near lows of 1.03600. The EUR/USD may have some interesting days and weeks ahead because of political implications which will develop in March.
The European Central Bank will actually release its Main Refinancing Rate this coming Thursday and are expected to cut its borrowing rate by another 0.25. However, this decision while important will take a backseat to the complications unfolding regarding European policy towards the Ukraine and the impetus from the U.S White House. It is unlikely for Europe to suddenly emerge and say it can back the Ukraine monetarily alone. It is also unlikely Europe can back the Ukraine militarily alone. This means the U.S is unlikely to be replaced as a main mover in the Ukraine – Russia war.
Bias is dangerous when taking perspectives in Forex. It is important to note behavioral sentiment will certainly react early this week and cling to hope that talks will continue between Ukraine and the U.S for a proposed resolution. The EUR/USD will react to the noise. The EUR/USD finished Friday’s trading near ratios it saw last on the 12th of February. If financial institutions remain nervous regarding the Ukraine – Russia was this could dampen the mood of financial institutions which believe the currency pair is oversold and continue to create headwinds.
While economics for the E.U should be the focal point for the EUR/USD along with a correlation to USD centric notions, behavioral sentiment among institutional traders influenced by politics will remain highlighted. Trading early this week will be filled with reactions to noise and hopes for better outcomes.
- The EUR/USD has shown the capability of trading at lower values in January and February.
- While some may believe the selling in the EUR/USD is overdone and that it should rise in value over the coming weeks and mid-term, this might not help prospects for the short-term.
The EUR/USD on the surface may look oversold. Conditions may be overly nervous. The prospect that the Ukraine and the U.S will start to speak again and find a resolution to their current situation is an optimistic approach. However, it may prove difficult to attain a good short-term viewpoint that is spoken regarding the current circumstances. Traders may doubt the importance of the impact the EUR/USD will feel via the current political crisis, but if the currency pair starts this week out lower, it will likely be because of negative behavioral sentiment caused directly by the loud storm between the U.S and the Ukraine.
The EUR/USD has a big test ahead as financial institutions wonder if stability will be delivered and what are the worst case scenarios opposed to the best. Traders should be ready for more volatility and a wide trading range in the EUR/USD during March. Economics are important, but a solid dose of good news regarding Ukraine and steps forwards towards a negotiated agreement with the U.S would do wonders for EUR/USD bullish momentum, until then be ready for choppy conditions.
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