EURUSD has reached the Lower high area of the Descending channel
EURUSD This Past Week
EURUSD is among the many forex pairs that have seen high market volatility in recent months as a result of the global economic crisis. When we look at the EURUSD chart, we can see that it has been consistently changing within tiny time periods. This major currency pair would reach extremely high and extremely low levels in a matter of days. This pair has seen highs of about 1.104 and lows of around 1.094 in the last week. This wide range of changes can be attributed to the current conflict between Russia and Ukraine, where we are continuously getting reports indicating either a truce or that situations have deteriorated significantly. It can also be blamed for the unstable economy that has consumed both the United States and the European Union. Let’s take a look at what’s been affecting the EURUSD today.
EURUSD has reached the Horizontal Resistance area of the Ascending triangle Pattern.
German GDP Forecast
Early on Wednesday, the German government’s economic advisors held a public conference where they discussed the future of the German economy. This speech was highly anticipated as Germany had been keeping a very low profile considering the current crisis impacting Europe. In this speech, it was revealed that the council is going to cut the GDP forecast for the year into half. The forecast was previously 4.6% and it has now become 1.8%. They believe that this would present a more realistic number considering the current war that’s ongoing between Russia and Ukraine. The council further adds that the rising inflation in the country certainly makes it even more difficult to achieve the numbers of the previous forecast.
Volker Wieland, Economic Advisor for the German Government, said in his statement, “Before the outbreak of war, rising industrial production and a robust labor market pointed to an economic recovery. The Russian war of aggression against Ukraine has now drastically worsened economic conditions. A major lesson from the coronavirus and Russia crises was that Germany’s economy needs diversification – not just for energy, but also in the country’s industry supply chains as the sector relies heavily on upstream products from abroad. Germany should immediately pull out all the stops to arm itself against a possible halt in Russian energy supplies and at the same time quickly end its dependence on these imports.”
ECB Lagarde Speech
ECB President, Christine Lagarde held a speech on Wednesday where she addressed some concerns that were brought up following her last speech a couple of days ago. It is evident that Lagarde is placing the blame of the war between Ukraine and Russia to be the main reason for most of the economic problems concerning Europe. She addresses some policy changes that she’s planning on executing in order to bring the concerns of the people under control. Lagarde warns the people that in the short-term, they will face a rise in inflation while also slow economic growth. However, she also reassures them that this is only temporary and that her policies and procedures will solve this issue in the long term.
In her speech, Lagarde states, “With the right policy response, we can mitigate the economic consequences of the war and manage the high levels of uncertainty we are facing. To offset the short-term effects of higher energy prices and sanctions, national fiscal policies have a range of tools to deploy, such as tax cuts and subsidies. And rules at the EU level are being loosened so that governments can take the necessary measures to protect their people. But in the longer term, we need a European approach, working across borders, to adjust to the post-invasion world. The war has underlined the deep strategic vulnerabilities in our security and trade relationships, which we can only address by being more united. This is rightly bringing Europe’s objective to achieve “strategic autonomy” to the forefront.
Lagarde ended her speech with some words of motivation for the people. She narrated, “Europe is entering a difficult phase. We will face, in the short term, higher inflation and slower growth. There is considerable uncertainty about how large these effects will be and how long they will last. The longer the war lasts, the greater the costs are likely to be. At the same time, Europe’s recent history shows that, with each crisis, we have learned the right lessons and emerged stronger. That was true after the sovereign debt crisis and the pandemic, and all the signs suggest that the Russian invasion will be a turning point for Europe, too.”
German Gas Supply
Not long ago, Russia revealed its demand of getting paid in Rubles instead of Dollars or Euros for the supply of oil and gas that they were exporting to other countries. Whoever didn’t pay in that method would soon face a shortage in their energy supply. Germany is among the many countries that refuse to meet these demands. They are moving ahead with their plans to sanction Russia and find another oil supplier. This will severely impact Russia’s economy but it will also have implications on Germany’s economy unless they find another supplier.
Olaf Scholz, Chancellor of Germany, had come out in a statement revealing his thoughts on this ordeal. Scholz states, “There is no doubt that these are substantial economic costs, but at the same time, they are clearly manageable in the sense that the German economy has weathered deeper slumps in recent years and recovered quickly. Both after 2009 and 2020, the economy and the polity overcame larger GDP declines. Public fear-mongering about the catastrophic consequences of an energy embargo from lobby groups and affiliated think tanks does not hold up to academic standards.”
EURUSD Today
EURUSD had been following a consistent upward trend throughout the day in anticipation of the ECB speech by President Lagarde. Around this time, we also found out about Germany’s GDP forecast for the year, as we just discussed above.
EURUSD has rebounded from the higher low area of the Rising Wedge Pattern.
Following the release of these events, EURUSD faced a slowdown in its upward trend as it slowly started retreating further down the charts. EURUSD reached a high of 1.115 before it started falling back slightly. This major currency pair is now teasing around the 1.113 point and it seems as though it may just take one last shot at moving up the charts once again.
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