Investors seem to have brushed aside concerns over the escalation of tensions between Russia and Ukraine as risk assets bounced from their lows yesterday, including the euro which saw EURUSD recover from lows around 1.3335 back to 1.3375 where it is trading this morning. No more evident is this lack of concern over the geopolitical situation from the movements we’ve seen in oil recently where Nymex crude has this week hit its lowest level since January, Brent its lowest since November last year. A break below the trend line support around $96.60 in Nymex could lead to further downside.
The euro will remain the focus of the day with the ECB due to meet and investors want to see how they will react to the recent slew of poor economic data. Inflation has continued on its downward spiral and yesterday Italy’s economy sunk back into an official recession. The ECB is highly unlikely to do anything spectacular today so once again we will have to focus on the language which is expected to become more dovish in light of the defensive stance that banks have been taking in the Eurozone. The BOE meeting also today ahead of the ECB is worthy of a cursory mention, but the big focus for sterling is next week’s BOE Inflation Report and then the minutes of today meeting the week after where we’ll see if anyone has voted for a hike.
EURUSD remains in a bearish trend over the short term, however yesterday’s daily candle formed a “hammer” and other technical indicators are signalling over sold, so there’s a chance we could see a continuation of this bounce. Key levels to watch are resistance at 1.3445 and support at 1.3335, then 1.3300.