Euro at 5-year low
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The euro continues to lose ground and is down for a fifth consecutive day. EUR/USD is down nearly 1% today as it trades at 1.0542.
Russian comments weigh on markets
The euro blues shows no signs of abating as the currency takes a beating from the US dollar. EUR/USD is down 2.34% this week and fell 4.72% in April. Moscow’s comments dampened risk appetite and weighed on the faltering euro. Russia is clearly disturbed by arms shipments from the United States and Western Europe to Ukraine, and Russian officials have responded with threatening rhetoric, warning that these arms shipments are legitimate targets. Russian Foreign Minister Lavrov added that the threat of nuclear war is “real”.
If that wasn’t enough to worry investors, Russia announced that Poland and Bulgaria would see their natural gas supply cut off if they didn’t pay in roubles. Moscow is upping the ante by militarizing its energy supplies, a move that could have disastrous consequences for European countries dependent on Russian energy. In this gloomy environment, it is not surprising that the euro is under strong pressure, and could head towards 1.0300 and even parity if the showdown between the West and Russia continues.
Another factor weighing on the euro is the Federal Reserve, which is tightening policy and is virtually certain to offer a half-point rate hike next week. As Fed Chair Powell and other FOMC members say more half-point hikes could be on the cards, aggressive Fed widens U.S.-US rate spread Europe and makes the euro less attractive for investors.
- EUR/USD continues to break through support levels. 1.0553 is under pressure followed by support at 1.0411
- There is resistance at 1.0657 and 1.0728
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