Russian forces' destruction of a nuclear facility in southern Ukraine caused a fire, leading to suspected nuclear radiation leakage. The incident triggered panic in the markets. Global stock markets fell, gold prices rose 2%, and crude oil prices surged over 6.8%. Major European currencies, the euro and the pound, fell by 1.27% and 0.9%. Safe-haven funds flowed to Asian currencies, especially commodity currencies, as the Japanese yen rose 0.56%, the Australian dollar rose 0.66%, and the New Zealand dollar rose nearly 1%. The Canadian dollar did not benefit significantly from the surging crude oil prices as the loonie was only up 0.39%.
The US dollar is approaching the 99 mark
The Ukrainian-Russian war continues to escalate, and European funds have flowed out of the euro. The EUR/USD pair hit an 18-month low of 1.0882. Since the outbreak of the Ukraine-Russia crisis, the single currency has dropped over 500 pips. The euro against the US dollar pair has recorded the biggest decline since June 2021. The US dollar index broke through last month’s high and rose to a high last seen over 20 months ago. The index is approaching the 99 mark and has just printed a high of 98.91.
Over the weekend, Russian forces announced a temporary ceasefire and opened humanitarian corridors to evacuate affected Ukrainian refugees safely. But the ceasefire is short-lived, and whether Russian troops can fully penetrate the country’s defenses and enter Ukraine this week will mark a critical turning point. If the Russian army succeeds in taking complete control of Ukraine, the war could temporarily subside, and the tension in the global markets could be eased. As a result, there is a greater chance of stabilizing market sentiment, with European currencies, and the global stock markets expected to "recover from slumps".
In the meantime, investors are waiting for the European Central Bank's interest rate meeting and the ECB's press conference on Thursday night. In the face of high inflation and war tensions in Europe, the ECB's monetary policy orientation "whether the eagle or the dove" will be one of the key drivers behind the future trends of the European currency.
AUDNZD post strong gains
Technically, if the EUR/USD falls below 1.0880, it may head down to 1.0772. If it stops falling and rises, it will look at 1.1050 and 1.1115 as short-term resistance. If the GBP/USD pair falls below 1.3135, it could be headed down to 1.3085 or could challenge the 1.30 level. If it rebounds, it can be above the 1.3380 resistance level or 1.3435.
Commodity currencies were strong last week, with the AUD and NZD hitting three-month highs, trading at 0.73 and 0.68, respectively. Tomorrow's two-day Australian economic data is one of the crucial data that could impact the Australian and New Zealand dollar movements. Whether the Australian dollar can break through 0.74 in one fell swoop and challenge the 0.7460 resistance is critical to the recent trend. On the contrary, if the trend turns lower, there is a chance to test 0.7240.