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Souring Sentiment Prompts Flight To Quality, Euro Crosses Extend Declines

FOREX
  • A deterioration in risk-sentiment surrounding the Ukraine war was characterised by renewed weakness in equities and further surges in the commodity complex, especially evident in crude futures, rising another 6%. In turn, this saw further significant pressure on Euro crosses as well as lending support to the greenback approaching the weekend.
  • EURUSD trades 1.2% weaker as of writing and has made notable technical progress to the downside throughout the week. Moving average studies point south and the bearish price sequence of lower lows and lower highs remains intact. 1.1000 and 1.0976, a Fibonacci projection have both been cleared with the move lower falling just shy of the 1.0871 level, the low seen on May 25, 2020.
  • Continued buoyancy of the commodity complex as well as geographical dynamics made Euro crosses an even more attractive short. EURJPY (-1.85%) EURAUD (-1.89%) and EURNZD (-2.19%) all cratered throughout the session, with rising tensions in Ukraine showing very few signs of this pressure on Euro crosses abating in the short-term.
  • Overall, the greenback was boosted as market participants sought a flight to quality. The dollar index rose 0.75% to extend above the 98.00 mark, edging towards the best levels of Q2 2020. The dollar strength finally put LATAM FX on the backfoot with USDMXN rising to the best levels of the year above 20.90. Additionally, the euro weakness significantly weighed on emerging market currencies in the CEEMEA region, with HUF and PLN considerably lower on Friday and prompting the Polish central bank to intervene to support the Zloty.
  • A light data calendar to kick off next week with Chinese trade balance figures and German factory orders. Naturally, developments over the weekend in Ukraine will determine the direction and volatility for currencies at the Wellington open.
Energy BulletsCommodities
Energy BulletsCommodities

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