The EUR/USD kept rising in the previous week’s trading session over concerns of the current situation of the Russia and Ukraine on-going crisis. There is talk that Russia could be behind the bulk of the more than 100billion drop in the Federal Reserve’s custody holdings for foreign central banks. Rather than selling the Treasuries, Russia simply transferred them from the Federal Reserve out of the U.S, as this contributed to the greenback’s weakness over the Euro.
Weekly bias in the pair remains on the upside as more demand is expected with 21/55 EMA’s, RSI, Stochastic and MACD are all showing bullish continuation on the 1hour and Daily charts. On Friday, worsen data from Prelim UoM Consumer Sentiment and PPI was seen and this could send the EUR/USD higher during the early week. I suggest a break of 1.3965 resistance before going long as there’s a pin bar formation on the daily charts with high volume in support on Thursday’s trading session. We might be seeing a potentiality of selling off on the way. A break of 1.38329 support could see more supply of the EUR/USD to 1.37064 support region.
The repercussions of Crimea’s referendum to join Russia which will take place on Sunday is likely to be a focal point in the market next week. The result of the referendum is expected to be in favour of joining Russia, so focus will be on Russia’s reaction to the request and how Europe and the US will respond to a possible Russian annexation of Crimea.
The FOMC meeting on Wednesday is set to be the highlight of the week. While we think the US is experiencing a genuine slowdown in the short run, it is likely to be temporary and we expect the FOMC to continue the tapering course and cut its asset purchasing program by an additional USD10bn, reducing the QE3 to USD55bn.