Dovish ECB and uncertainty over Ukraine favour bearish traders

• EUR/USD struggled to register any significant restoration and languished close to the two-year low.
• Dovish ECB, the Ukraine disaster weighed on the euro and acted as a headwind amid a stronger USD.
• Bets for a extra aggressive Fed coverage tightening, elevated US bond yields underpinned the buck.

The EUR/USD pair languished close to the 1.0800 mark by means of the Asian session on Monday and remained properly inside the putting distance of the two-year low touched in response to a dovish European Central Financial institution determination final week. In reality, the ECB left its key coverage charges unchanged and reaffirmed that fee hikes would solely come someday after the Asset Buy Program (APP) is concluded within the third quarter. This disenchanted some traders anticipating a extra hawkish tilt amid the record-high inflation. Other than this, rising worries concerning the potential financial fallout from the Ukraine disaster continued to behave as a headwind for the shared foreign money.

Then again, the US greenback stood tall close to its highest stage since April 2020 and continued drawing assist from expectations for a sooner coverage tightening by the Fed. The bets have been reaffirmed by feedback from New York Fed President John Williams on Thursday, saying {that a} half-point fee rise subsequent month was a really cheap choice. This was seen as an additional signal that much more cautious policymakers are on board for greater fee hikes at upcoming conferences. Other than this, inflation fears exacerbated the current rise within the US Treasury bond yields, which, together with a softer threat tone additional underpinned the safe-haven buck.

That stated, comparatively skinny liquidity situations on the again of a vacation in Europe held again merchants from inserting aggressive bets and would possibly assist restrict deeper losses, no less than in the intervening time. However, the bias appears tilted firmly in favour of bearish merchants and helps prospects for an additional near-term depreciating transfer. Within the absence of any main market-moving economic releases from the US, the US bond yields will play a key position in influencing the USD value dynamics. Merchants will additional take cues from developments surrounding the Russia-Ukraine saga and the broader market threat sentiment to seize some short-term alternatives.

Technical outlook

From a technical perspective, the post-ECB swing low, across the 1.0760-1.0755 area, now appears to behave as a pivotal level. Some follow-through promoting ought to pave the way in which for a fall in direction of the 1.0700 mark earlier than spot costs ultimately drop to the 2020 low, across the 1.0635 space.

On the flip aspect, tried restoration would possibly now confront instant resistance close to the 1.0850 area. Any subsequent transfer up might entice contemporary promoting close to the 1.0880-1.0885 zone and stay capped close to the 1.0900 mark. The following related barrier is pegged close to the 1.0935-1.0940 space, which if cleared decisively would possibly immediate some near-term short-covering transfer.