Bearish Flag Points to A Steeper Drop

The EUR/USD price made a bullish breakout on Tuesday as signs of progress on Ukraine emerged. As a result, the pair rose to a multi-week high of 1.1136. It has risen by more than 2.8% from its lowest level this month.

Ukraine optimism

The EUR/USD pair has been under intense pressure in the past few days as investors worry about the crisis in Ukraine. For one, it is expected that the crisis will lead to a significantly lower standard of living in most European countries because of the higher inflation rate.

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There have been some progress in the past few days. On Tuesday, officials representing the two countries met in Turkey for negotiations. While no deal was made, the two sides said that the talks were constructive.

Ukraine has sounded a bit optimistic about its neutrality while Russia has announced that it will reduce its activities around Kyiv. As such, this means that it was no longer interested in toppling the current regime in the country.

Still, analysts believe that the situation will not improve any time soon considering that intense fighting is happening in many parts of Ukraine. 

The EUR/USD will be in the spotlight today as Christine Lagarde delivers a speech. In it, the head of the European Central Bank (ECB) is expected to talk about the state of the economy and some of the measures that the bank is willing to take.

Other data to watch will be the business and consumer confidence from the European Commission. Analysts expect these numbers to reveal that the Eurozone’s confidence declined slightly in March because of the ongoing fighting.

The US will also publish important economic numbers on Wednesday. They include the final GDP reading and private payrolls numbers.

EUR/USD prediction

The EUR/USD pair has been in consolidation mode in the past few weeks as shown in the daily chart below. The pair has formed a narrow channel that is indicated in pink. This channel can be said to be part of the bearish flag pattern. In technical analysis, this pattern tends to be a bearish sign.

Therefore, the pair will likely have a bearish breakout in April this year. If this happens, the next key level to watch will be at 1.100, which is at the lower side of this channel.

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