EUR/USD Price, Chart, and Analysis
The Euro is hitting fresh multi-month lows against a rampant US dollar and is testing the 108.00 big figure as the ongoing Ukrainian crisis continues to unfold in the foreign exchange market. With little in the way of technical support, and with the European Central Bank (ECB) unable to prevent further losses, the pair may soon hit 106.34, giving back all of EUR/USD’s pandemic-era gains.
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The ongoing bid for the greenback has pushed the US dollar basket (DXY) back to highs last seen in May 2020 with heavy demand driven by haven flows. In times of market stress, investors move into the US dollar due to its abundant liquidity. This liquidity bid, and the supportive outlook from higher US interest rates that are expected over the coming months, have seen the US dollar basket appreciate by over 10% from its January 2021 low print. The DXY is approaching the 23.6% Fibonacci retracement of the February 2018 – March 2020 rally around 100.17 and this level may act as a short-term brake, especially with the CCI indicator flashing a heavily overbought signal.
US Dollar Basket Weekly Chart – March 7, 2022
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With US interest rates on the way up – the Fed has clearly signaled this in the past weeks – and with the ECB unable to hike rates yet due to fears of slowing EU growth, EUR/USD looks primed to move lower in the weeks ahead. All of the hawkish rhetoric from the last ECB meeting has been fully wound back and the central bank will now have to try and convince the market that they can balance out surging inflation and slowing growth over the rest of 2022. This will not be an easy job and leaves the single currency at risk of further losses with a cluster of lows around 108.00 protecting the March 2020 low of 106.36. The pair is oversold looking at the CCI indicator but any move higher is likely to be met with renewed selling unless the macro backdrop changes.
EUR/USD Weekly Price Chart – March 7, 2022
Retail trader data show 66.60% of traders are net-long with the ratio of traders long to short at 1.99 to 1. The number of traders net-long is 2.25% higher than yesterday and 6.32% higher from last week, while the number of traders net-short is 25.03% higher than yesterday and 0.53% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/USD trading bias.
| Change in | Longs | Shorts | OI |
| Daily | 15% | -12% | 1% |
| Weekly | 2% | -14% | -6% |
What is your view on the EURO – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.
