Tuesday, March 18, 2014

Euro strong as Ukraine crisis develops

The EUR/USD has had a steady uptrend since Feb.  Analysis of any sanctions against Russia suggest that the US or the EU may be more negatively impacted.  For the time being, EUR/USD seems to be getting a boost from real money flows - as concerned parties sell their USD for EUR.  But how long with that last?  If the EU is a net loser of this situation, be it from sanctions, or the close proximity to Ukraine, it will certainly put pressure on the Euro.  But if Russia and China retaliate, the US would feel the most economic pressure (for example by Russia/China dumping USD on the market).  These opposing pressures will make it difficult for EUR/USD to have a clear direction in the coming months as the crisis unfolds.  Also, volatility can be expected in any Euro or US Dollar denominated pair, if any significant actions are taken by a state (such as China flooding the market with USD which they have in large supply).  See the below daily EUR/USD chart: