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05.04.202222:19 Forex Analysis & Reviews: Brainard revived the dollar. Euro falls victim to short positions

Exchange Rates 05.04.2022 analysis

The EUR/USD remains vulnerable as the dollar recovers quickly across the board. The lowest levels since mid-March were broken on Tuesday - first 1.0950, and then 1.0920. The bears have every chance to break through the 1.0900 mark.

The US dollar's growth is associated with the fall of treasury bonds and the rapid growth of the yield of 10-year bonds. The figure jumped to 2.56%, the highest level since mid-2019. The dollar index gained almost half a percent of value and traded above 99.40 during the US session. Thus, it could close at its high in almost two years.

Up to the round and many times over the past month, there's quite a bit left to the predicted barrier of 100.00. At this rate, it will be reached and broken through in the next sessions.

Exchange Rates 05.04.2022 analysis

Markets are more than confident that the Federal Reserve will raise rates by 50bp. They hope to see these signals in the minutes of the last meeting, whose publication is scheduled for Wednesday. Investors drew attention to the rhetoric of the US central bank's officials, which is becoming increasingly harsh. It is the words of Deputy Fed chiefs that pushed up Treasury yields and the dollar index. Lael Brainard announced the readiness of the central bank to take drastic measures if the inflation forecast and inflation expectations indicators suggest the need for such actions. According to her, a rapid reduction in the Fed's balance sheet is possible along with a methodical increase in the base rate.

Investors are also closely monitoring further developments in Ukraine. The situation seems to have escalated, and the upcoming Russian-Ukrainian negotiations promise to be difficult. What is happening has affected the mood of the markets.

Now the Ukrainian city of Bucha is in the spotlight. The topic risks becoming central at the next auction and having an unpleasant continuation in the form of an economic conflict between Russia and the EU. In addition to the announced sixth package of sanctions, which, according to European officials, could be introduced as early as Wednesday, the EU managed to reach an internal agreement to ban coal imports from Russia.

The EU is working on additional sanctions, including on oil imports, European Commission President Ursula von der Leyen said on Tuesday.

EUR/USD bears are expected to continue to control the situation amid tensions in Eastern Europe. The course may well continue to suffer losses towards the 1.0800 mark, economists at Scotiabank predict.

Support levels are located at 1.0920, 1.0870, 1.0835. Resistances are at 1.1015, 1.1070, 1.1115.

Exchange Rates 05.04.2022 analysis

Natalya Andreeva,
Analytical expert of InstaSpot
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