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06.04.202222:27 Форекс анализи и прегледи: EUR/USD: Triple threat to the euro

Exchange Rates 06.04.2022 analysis

The euro has fallen to the lowest levels in a month and risks falling lower by the end of this week. A short-term decline to the level of 1.0873 was recorded for the EUR/USD pair. The announced plans of the EU to impose sanctions against Russia cannot be positive for the euro exchange rate, quite the opposite is true. The prospect of their introduction puts pressure on the exchange rate of the European currency.

Sanctions

The share of Russian coal in the global market exceeded 16% last year, while it reached 50% in the European market. The share of Russian thermal coal was 70% in Germany. Sanctions should be agreed today, but it is unclear in what form they will be adopted and whether all EU members will have time to vote in such a short period of time.

At the moment, there is practically no reaction from gas prices, quotes are declining, but not critically. It may be difficult for market players to believe that Europe will impose an embargo on coal from Russia. Previously, they also did not believe that Europeans would refuse to buy gas for rubles.

It is worth noting that the first payment for gas in rubles should take place at the end of April or in May, it all depends on the contracts.

It is unlikely that the cessation of exports of high-tech industrial goods worth 10 billion euros per year to Russia will be positive for the eurozone economy. We are talking about electrical equipment, semiconductors, technologies for liquefied gas).

France

Another threat to the euro comes from France. There is reason to believe that the French Eurosceptic and presidential candidate Marine Le Pen is closing her gap with the current president of the country.

The first round of voting, which will take place this weekend, is approaching. Even the slightest signal of the possibility of Le Pen's victory will increase the pressure on the euro. According to ING economists, investors can now start putting a risk premium in EUR/USD prices.

Exchange Rates 06.04.2022 analysis

If this includes the side negative effect of the new sanctions against Russia, then the risks of a fall in the EUR/ USD exchange rate increase significantly. The 1.0750-1.0800 area may be broken this weekend. Any breakthrough below the value of 1.0817 will strengthen the bearish mood now.

Dollar

The third powerful driver is the dollar or the increase in the yield of treasuries, which pushes the US currency index to test and break through the three-digit indicator.

The indicator is approaching a two-year high, the 100.00 mark is on the way. The Federal Reserve's more hawkish stance contributes to growth. A certain leap occurred after the speech of the vice chair of the central bank, Lael Brainard. It's not even about her rhetoric, which revealed the notes of a rigidly tuned central bank. Brainard is considered one of the FOMC doves. The aggressive position of the official, known for her soft attitude to monetary policy, speaks of the Fed's determination to raise rates.

The technical picture also indicates the willingness of traders to rally the dollar. In such a situation, it is difficult to see an alternative to the further fall of the European currency.

Exchange Rates 06.04.2022 analysis

Natalya Andreeva,
Analytical expert of InstaSpot
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