EUR/USD: EU confiscation of Russian assets under discussion
By Ion Jauregui - ActivTrades Analyst
The revival of the debate in the EU over the possible confiscation of frozen Russian assets, valued at €210 billion, raises concerns about its implications for the euro and thus the EUR/USD. The move, promoted by the likes of Valdis Dombrovskis and Kaja Kallas, seeks to pressure Russia over its war in Ukraine, but could have a disproportionate impact on the European currency.
Risks for the euro:
- Loss of confidence: The move could damage global confidence in the euro as a safe-haven asset, given the precedent it would set in the legal framework. This could lead central banks, such as China's, to reduce their euro reserves, affecting demand for the currency.
- Financial volatility: Euroclear, which manages a large part of these assets, warns of possible Russian countermeasures and volatility in the markets, which would put negative pressure on the euro.
- Dollar Strengthening: Risk perception could reinforce the dollar as a safe haven, further weakening EUR/USD.
Technical Analysis:
The beginning of the Asian day the EURUSD has moved slightly lower, currently trading in the direction of the support of the last upward momentum started last week at 1.04506. However, the crosses of the averages do not indicate a change of direction and the RSI reinforces this by showing an oversold level at 42%. On the other hand, the POC is at 1.04177 marking a strong time frame pressure zone on the daily chart.
This week, key events that may affect EUR/USD include:
1. Monday 27: IFO index in Germany (business confidence). With a different result than expected, fluctuations could be seen.
2. Tuesday 28: US Durable Goods Orders, which may influence the dollar strength.
3. Wednesday 29th: Fed rate decision, with expectations to keep rates steady. Although the Fed is expected to keep interest rates in the 4.25%-4.50% range, any comments on future monetary policy or economic outlook could impact the dollar and thus the EUR/USD.
4. Thursday 30: ECB decision, with a possible 0.25% interest rate cut, and comments from Christine Lagarde to assess the future direction of European monetary policy.
5. Friday 31: Preliminary Eurozone GDP for the fourth quarter, which may influence the performance of the euro.
In addition, the results of large technology companies in the US (Microsoft, Meta, Tesla and Apple) could influence market sentiment and the dollar. It is advisable to monitor these events and keep an eye on possible statements from central bank officials, as any unexpected changes or comments may generate volatility in the EUR/USD pair.
Short-term outlook:
If the EU moves forward with this measure, EUR/USD could face downward pressures due to a combination of capital outflows, increased risk aversion and a strengthening dollar. This backdrop underscores the euro's sensitivity to political and economic decisions in the region.
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
The revival of the debate in the EU over the possible confiscation of frozen Russian assets, valued at €210 billion, raises concerns about its implications for the euro and thus the EUR/USD. The move, promoted by the likes of Valdis Dombrovskis and Kaja Kallas, seeks to pressure Russia over its war in Ukraine, but could have a disproportionate impact on the European currency.
Risks for the euro:
- Loss of confidence: The move could damage global confidence in the euro as a safe-haven asset, given the precedent it would set in the legal framework. This could lead central banks, such as China's, to reduce their euro reserves, affecting demand for the currency.
- Financial volatility: Euroclear, which manages a large part of these assets, warns of possible Russian countermeasures and volatility in the markets, which would put negative pressure on the euro.
- Dollar Strengthening: Risk perception could reinforce the dollar as a safe haven, further weakening EUR/USD.
Technical Analysis:
The beginning of the Asian day the EURUSD has moved slightly lower, currently trading in the direction of the support of the last upward momentum started last week at 1.04506. However, the crosses of the averages do not indicate a change of direction and the RSI reinforces this by showing an oversold level at 42%. On the other hand, the POC is at 1.04177 marking a strong time frame pressure zone on the daily chart.
This week, key events that may affect EUR/USD include:
1. Monday 27: IFO index in Germany (business confidence). With a different result than expected, fluctuations could be seen.
2. Tuesday 28: US Durable Goods Orders, which may influence the dollar strength.
3. Wednesday 29th: Fed rate decision, with expectations to keep rates steady. Although the Fed is expected to keep interest rates in the 4.25%-4.50% range, any comments on future monetary policy or economic outlook could impact the dollar and thus the EUR/USD.
4. Thursday 30: ECB decision, with a possible 0.25% interest rate cut, and comments from Christine Lagarde to assess the future direction of European monetary policy.
5. Friday 31: Preliminary Eurozone GDP for the fourth quarter, which may influence the performance of the euro.
In addition, the results of large technology companies in the US (Microsoft, Meta, Tesla and Apple) could influence market sentiment and the dollar. It is advisable to monitor these events and keep an eye on possible statements from central bank officials, as any unexpected changes or comments may generate volatility in the EUR/USD pair.
Short-term outlook:
If the EU moves forward with this measure, EUR/USD could face downward pressures due to a combination of capital outflows, increased risk aversion and a strengthening dollar. This backdrop underscores the euro's sensitivity to political and economic decisions in the region.
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.
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