Euro Falls Broadly as EU Considers Fresh Sanctions Against Russia

Euro falls broadly today on expectation that EU is going to impose another round of sanctions against Russian following war crimes in Ukraine. Additionally, investor confidence data indicates the war in Ukraine is pushing Eurozone into recession. Sterling and Swiss Franc are broadly weak too. Commodity currencies are currently the stronger ones while Dollar and Yen are mixed.

Technically, EUR/CHF’s breach of 1.0814 minor support argues that rebound from 0.9970 has completed already. Rejection by 38.2% retracement of 1.1149 to 0.9970 at 1.0420, and 55 day EMA keeps medium term outlook bearish. Retest of 0.9970 would be seen next. At the same time, attention will be on whether EUR/USD and EUR/GBP would break through 1.0943 and 0.8294 support levels to revive near term bearishness.

In Europe, at the time of writing, FTSE is up 0.06%. DAX is down -0.12%. CAC is up 0.03%. Germany 10-year yield is down sharply b y -0.072 at 0.484. Earlier in Asia, Nikkei rose 0.25%. Hong Kong HSI rose 2.10%. China was on holiday. Singapore Strait Times dropped -0.06%. Japan 10-year JGB yield rose 0.0004 to 0.217.

Eurozone Sentix dropped to -18 in April, pushed into recession

Eurozone Sentix Investor Confidence dropped from -7.0 to -18.0 in April, much worse than expectation of -9.7. That’s also the lowest level since July 2020. Current Situation index dropped from 7.8 to -5.5, lowest since April 2021. Expectations index dropped from -20.8 to -29.8, lowest since December 2011.

Sentix said the Eurozone economy is “being pushed into recession by the Ukraine conflict and the accompanying sanctions and uncertainties.”

“Due to the still considerable dynamics in the inflation trend, investors do not expect the central bank to be able to come to the rescue with a looser, even more expansive monetary policy. The economy and the stock markets are thus left to their own devices. For many investors, this is a new experience with its own risks.”

BoE Bailey: Crypto creates an opportunity for the downright criminal

BoE Governor Andrew Bailey criticized at a “Stop Scam” conference that’s cryptocurrencies created an “opportunity for the downright criminal.” He asked, “what do people committing ransom attacks usually demand payment in? The answer is crypto.”

He also lamented that cryptocurrency users act as though national rules do not apply to them. “Some crypto enthusiasts say they shouldn’t be covered by Russian sanctions because that’s not their world,” he said. “I’m sorry, it is your world. We’re all in the same world.”

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1027; (P) 1.1052 (R1) 1.1075; More…

EUR/USD’s fall from 1.1184 extends lower today but stays above 1.0943 support. Intraday bias remains neutral first. On the upside, break of 1.1184 will resume the rebound from 1.0805 to 38.2% retracement of 1.2265 to 1.0805 at 1.1363. However, break of 1.0943 will revive near term bearishness and bring retest of 1.0805 low first.

In the bigger picture, the decline from 1.2348 (2021 high) is expected to continue as long as 1.1494 resistance holds. Firm break of 1.0635 (2020 low) will raise the chance of long term down trend resumption and target a retest on 1.0339 (2017 low) next. Nevertheless, break of 1.1494 will maintain medium term neutral outlook, and extending term range trading first.

Economic Indicators Update