The euro remains on a downswing and has extended its losses for a fourth straight day. EUR/USD has dropped below the 1.07 line for the first time since March 2020.
Euro drenched by April showers
April has been nasty for the euro, which has fallen over 300 points. The Ukraine war and the hawkish Fed have been a toxic mix for the euro, as investors have dumped the currency and flocked to the safe-haven US dollar.
The war between Russia and Ukraine grinds on, and the uncertainty over Russian energy supplies to Europe and sanctions against Russia have dampened sentiment towards the euro. Tight sanctions against Russia, which have led to soaring oil prices, are also having an effect on the growth of eurozone countries. There are calls within Europe to hit Russia even harder by banning Russian energy imports. However, Germany is understandably against such a sweeping move, given that Russia provides Germany with 25% of its oil and 40% of its natural gas, and cutting off these supplies would push Germany into a recession.
Across the pond, Federal Reserve hawkishness is also weighing on the euro. The Fed is in a hurry to roll out further rate hikes in order to contain inflation, and Fed Chair Powell has hinted strongly at a 0.50% increase at the May meeting, with possibly more such increases in the coming months. This widening of the US/Europe rate differential is weighing on the euro, which is on track to break below the 1.06 shortly.
On Sunday, President Emmanuel Macron won a decisive victory over Marie Le Pen of the extreme right, by a score of 58% to 42%. The mood in European markets was one of relief rather than elation, given that Le Pen, a staunch euro-sceptic had her best showing ever. The victory of the pro-business Macron is good news for the markets, but it hasn’t stopped the euro’s slide this week.
- EUR/USD continues to break through support levels. 1.0657 is under pressure, followed by support at 1.0553
- There is resistance at 1.0728 and 1.0832
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.