• Hawkish expectation from the Fed and the Policymakers comments favors the greenback.
• Russia – Ukraine geopolitical tension magnifies fears and exerts downward pressure on EUR/USD.
• ECB meeting fails to favor the Euro.

Euro continued its downtrend of Friday trading session on Monday early Asian session. This move can be linked to the Traders being nervous about tensions in Ukraine and a possible hawkish tilt by the Federal Reserve at a much-watched meeting this week- Wednesday.

“Markets are largely worrying and waiting, focussing on the FOMC and Russia-Ukraine tensions,” said Moh Siong Sim, currency strategist at Bank of Singapore, referring to the rate-setting Federal Open Market Committee, which kicks off its two-day meeting this week.

Elsewhere, Tensions in Ukraine have been increasing for months after the Kremlin massed troops near its borders, which the West says is preparation for a war to prevent Ukraine from joining NATO. The U.S. State Department announced on Sunday it was ordering diplomats’ family members to leave Ukraine. The New York Times reported that “President Joe Biden was considering sending thousands of U.S. troops to NATO allies in Europe along with warships and aircraft.”

On the other hand, ECB meeting failed to impress Euro. ECB President Christine Lagarde said on Friday that geopolitics and weather factors are driving energy prices higher, However the ECB is not seeing wages being bid up. He also added that demand in Europe is not excessive and, as a result, we are unlikely to face the same inflation as the US.

Finnish central bank chief Olli Rehn said on sunday that the drivers of inflation in the euro zone will subside over the course of the year and inflation will hover around the European Central Bank’s price stability target of 2% in the next two years.

“Personally, I expect the economic data to remain relatively good despite being affected by the Omicron variant,” Rehn said, adding he therefore viewed rate hikes in 2023 as a logical step, at least as long as there are no new economic shocks. However, His comments did not do much help to the Euro.

EUR/USD 4 Hour Chart:

Support: 1.1307 (S1), 1.1274 (S2), 1.1248 (S3).

Resistance: 1.1366 (R1), 1.1392 (R2), 1.1425 (R3).

The Hawkish expectation from the Fed and the Russia- Ukraine tensions seems to favor the US dollar. We expect a bearish trend for EUR/USD.