Euro Eyes ECB Forum as Russia Default Leaves Risk Appetite Intact. Will EUR/USD Break Out?

Euro Eyes ECB Forum as Russia Default Leaves Risk Appetite Intact. Will EUR/USD Break Out?
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EURO, EUR/USD, Crude Oil, G-7, ECB Forum – Talking Point

  • The Euro has continued to move sideways as geopolitical events unfold
  • APAC equities moved higher despite risks continuing to surface globally
  • After the G-7 summit an ECB forum might give markets a kick

The Euro has continued to hold ground with the markets cheery attitude to risk assets rolling into a new week. Although equities had a good day, the growth linked AUD and NZD were slightly softer while gold saw small gains, trading near US$ 1,835 an ounce.

The Bank of Japan (BoJ) meeting minutes were released and revealed that the bank is not worried about market pressures to change tack on their monetary policy path.

Tuesday will see an ECB forum take place in Sintra, Portugal. A star-studded panel will see Fed Chair Jerome Powell, ECB President Christine Lagarde and Bank of England Governor Andrew Bailey all appear on stage at the same time.

APAC equities followed Friday’s buoyant Wall Street lead, with all indices in the green today. Hong Kong’s Hang Seng Index (HSI) was given an extra boost from Shanghai re-opening after lockdowns, it was up over 3.5% at one stage. About a third of companies in the HSI are mainland China domiciled.

Russia have technically defaulted on their foreign-currency debt. In an unusual situation, Russia has the funds but are unable to make payment due to sanctions. The Russian finance minister called the default a ‘farce’.

The reality is that with a default, global bond funds will not be able to buy any future issuances. These fund managers were already unlikely to buy any of their bonds due to credit agencies pulling out of supplying ratings on Russian debt.

Without a recognised rating, the debt becomes unbuyable for real money managers. It should be noted that Chinese high yield debt has also under come under severe stress of late. This highlights the many risks that are still swirling, despite a rosier outlook for risk assets today.

The G-7 meeting in Bavaria continues and there is speculation that a plan is being hatched to allow for some Russian oil to flow, but that the price will be capped.

This news comes on the back of reports that US-Iranian nuclear talks will resume later this week. Crude oil has held onto Friday’s gains through the Asian session today.

The full economic calendar can be viewed here.

EUR/USD Technical Analysis

EUR/USD continues to consolidate in a sideways trading pattern. It has spent the last 2-weeks in a 1.0359 – 1.0638 range and the price is nearing the top end of this range.

A descending trend line is near 1.0638 and may offer resistance. The 21-, 34 and 55-day simple moving averages (SMA) are currently between the price and that level and might offer resistance.

Support could be at the previous lows of 1.0359, 1.0349 and 1.0340.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter



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