March 31, 2022 7:45:05

While the peace talks optimism may be fading, the euro is continuing to make back some of its losses since Russia entered into Ukraine in late February. News of oil potentially being released by the US is a positive due to the region’s high dependence on energy exports.

This week’s blockbuster inflation readings out of the region have also given the single currency a boost. A near double digit print in Spain and hot data from German states has pushed ECB rate hike expectations higher. Around 65bps is now priced in by markets by the end of the year.

These rate projections are now higher than the pre-war levels despite energy and gas prices remaining elevated. Along with uncertainty over any ceasefire, ECB President Lagarde also did little yesterday to back market expectations, citing “considerable uncertainty” and elevated risks to growth from the conflict. In contrast, the Fed is all set to put its foot to the floor with bigger rate hikes at its next meetings.

EUR/USD touches 50-day SMA

Tuesday’s upside breakout pushed through trendline resistance from the February highs. Prices had been struggling to move lower recently, steadying around the 1.10 level.

Yesterday saw the major advance through a previous zone of resistance around the late January and February low above 1.11. The midway point of the recent high/low move is also at 1.1150.

This morning’s push higher has been stopped so far by the November bottom at 1.1186 and the 50-day SMA at 1.1179. It hasn’t touched this indicator since mid-February and represents another resistance zone. Above here sits the next Fib level at 1.1231 and the 100-day SMA at 1.1248. But it will need a strong close to attempt these next levels.