EUR/USD pops to 1.1050 on hopes of a diplomatic solution in Ukraine

• EUR/USD rallies more than 1% and retakes the 1.10 barrier and beyond.
• Rising hopes of an end of the military conflict boosts the risk-on trade.
• EUR/USD flirts with the 200-hour SMA in the mid-1.1000s.

Auspicious news from the Russia-Ukraine front ignited a sharp change of heart in the risk-associated universe and now lifts EUR/USD to fresh 3-day highs well north of 1.10 the figure on Wednesday.

EUR/USD looks stronger on peace rumours

EUR/USD looks to consolidate the bounce off Monday’s 2022 lows near the 1.0800 yardstick and already gains more than 2 cents to trade back in the area past the 1.1000 hurdle on Wednesday.

Indeed, the pair saw its upside momentum accelerate further following hopes of a probable end of the Russia-Ukraine military dispute, all following news that the Ukrainian government said it is ready for a diplomatic solution.

The upbeat tone in spot is also propped up by the rebound in yields of the German 10y Bund to monthly peaks past the 0.20% level.

Nothing to report on the euro calendar, whereas MBA Mortgage Applications rose 8.5% in the week to March 4 and JOLTs Job Openings are due later in the NA session.

What to look for around EUR

EUR/USD managed well to regain upside momentum and reclaim the area above the 1.100 barrier on Wednesday. Price action around the European currency, in the meantime, is expected to remain dictated by the geopolitical landscape for the time being. Looking at the longer term, bouts of strength in the pair should remain underpinned by speculation of a potential interest rate hike by the ECB probably sooner than many anticipate, higher German yields, persevering elevated inflation, the decent pace of the economic recovery and auspicious results from key fundamentals in the region.

Key events in the euro area this week: ECB interest rate decision (Thursday) – Germany Final CPI.

Eminent issues on the back boiler: Asymmetric economic recovery post-pandemic in the euro area. Speculation of ECB tightening/tapering later in the year. Presidential elections in France in April. Geopolitical concerns from the Russia-Ukraine conflict.

EUR/USD levels to watch

So far, spot is gaining 1.35% at 1.1042 and faces the next up barrier at 1.1070 (10-day SMA) followed by 1.1288 (55-day SMA) and finally 1.1395 (weekly high Feb.16). On the other hand, a drop below 1.0805 (2022 low Mar.7) would target 1.0766 (monthly low May 7 2020) en route to 1.0727 (monthly low Apr. 24 2020).