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UAE Presidents Foreign Policy Advisor: The UAE is exercising restraint and seeking a way out for Iran and the region.The UAE presidents foreign policy advisor said Irans accusations against the UAE are "part of its unwise and chaotic policy."On March 15, S&P Global Ratings affirmed Saudi Arabias sovereign credit rating, adding that despite disruptions, non-oil growth momentum and related non-oil revenues should help support the economy. S&P stated that Saudi Arabia should be able to withstand the impact of the current conflict with Iran. S&P noted that the country should be able to shift oil exports to the Red Sea, utilize its vast oil storage capacity, and increase oil production post-conflict. The Saudi government should also be able to adjust investment spending related to "Vision 2030," a strategic framework launched by the country in 2016.On March 15th, Matt Reed, Vice President of the geopolitical and energy consultancy Foreign Reports, stated that an attack on Kharg Island could trigger Iranian retaliation against Gulf oil-producing countries. He said, "Iran will retaliate in kind." The United States warned on Friday that if Iran continues to block the Strait of Hormuz, Kharg Islands oil facilities could become the next target. Reed warned that the longer the conflict continues, the harder it will be to find alternative energy supplies. "At least 10 million barrels of oil are trapped in the Gulf every day, plus more than 4 million barrels of refined petroleum products and tens of billions of cubic feet of liquefied natural gas, with no easy alternatives." The International Energy Agency has announced the largest emergency oil reserve release in history, with 32 member countries planning to release approximately 400 million barrels of oil. However, Reed believes this measure will have limited effect, stating, "By the time the oil gets to the market, it may be too little, too late." He described it as nothing more than a "band-aid."On March 15th, local time, the Iranian Islamic Revolutionary Guard Corps issued a statement saying that in the past 48 hours, the US and Israel had launched attacks on several civilian industrial facilities in Iran, resulting in the deaths of several workers. The statement said that after setbacks in its confrontation with Iran, the US and Israel have turned to attacking non-military industrial facilities. Iran warned that US companies in the region should withdraw from their facilities and urged nearby residents to stay away from industrial areas with US capital involvement to avoid potential attacks.

EUR/USD Bears Refuel Following a 50% Mean Reversion, With an Eye on US GDP

Daniel Rogers

Apr 28, 2022 10:11

EUR/USD is trading near flat at 1.0552 at the Tokyo open, as the price consolidates below the 50% mean reversion of the previous session's sell-off. The pair, however, remains in the bears' hands as a result of the Ukraine crisis and risk-off markets favoring the US dollar.

 

The dollar was significantly stronger against its major trading partners during the middle of the week as traders awaited the advance Gross Domestic Product reading for Q1 that will be released today along with weekly initial jobless claims, followed by Personal Income and Spending, the Michigan Sentiment Index, and the Federal Reserve the following week.

 

While Fed members remain silent ahead of the Federal Open Market Committee meeting on May 3-4, the spotlight has shifted to China's covid lockdowns and the Ukraine crisis, both of which pose risks to European economic growth.

 

Russia cut off supplies of natural gas to portions of the region. On Wednesday, Russia's Gazprom (GAZP) cut off gas supplies to Poland and Bulgaria for failing to pay in roubles, intensifying an economic battle with Europe in reaction to Western sanctions imposed in response to Moscow's invasion of Ukraine.

 

Meanwhile, as China implements lockdowns in an attempt to contain the spread of COVID-19, Beijing has increased mass testing for the virus, and the combination of expectations for a 50 basis point hike at the Federal Reserve's May 3-4 meeting is dragging on the euro. WIRP indicates that 50 basis point increases at the May 3-4 and June 14-15 meetings are completely priced in, with over 25% probability of a possible 75 basis point increase in June.

The United States Dollar is on Fire

The dollar index against a basket of currencies (DXY) hit a record high of 103.282 in January. "We remain on track for a March 2020 peak near 103, but have arrived significantly sooner than predicted," Brown Brothers Harriman analysts said.

 

"Since such, we must begin thinking ahead, as we believe the strong dollar trend will continue into Q2 and possibly into Q3. Following 103, there is the December 2016 high near 103.65, which is also not that far off. Following that, there are no meaningful chart points until we reach the September 2002 peak of 109.24."

 

"This appears to be a step too far. Yes, we are bullish on the dollar, but we believe it cannot rally another 6-7 percent from current levels. Perhaps we can reach 105 before topping out, but that is purely a guess at this point."

 

In comparison to the Federal Reserve and market forecasts, the European Central Bank's tightening program is slightly behind schedule. Several ECB officials have called for the next rate hike to take place in July. Traders will be monitoring the European Union's inflation statistics, which will be issued on Friday, in this regard.

Technical Analysis of the EUR/USD

On an hourly basis, there is the possibility of a downward continuation as the correction approaches the 50% mean reversion level, a bearish engulfing, and another negative drift:

 

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