The Euro (FXE) has returned to early September’s lows below parity with the US Dollar on Wednesday as Russian President Vladimir Putin appeared to crush any lingering hope for an early end to conflict in Ukraine.

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That hope had risen somewhat last week after widespread international disapproval of Russia’s actions, going far beyond its usual vocal critics in Europe and North America. However, Putin on Wednesday announced a partial mobilization of the Russian army, to include the conscription of certain reservists. Russia also plans to hold referenda in eastern parts of Ukraine on their joining the Russian Federation. These are unlikely to find acceptance among the international community.

Putin’s belligerent speech concluded with a warning to the West that he was not bluffing when he says Moscow could use nuclear weapons in defense of its territory. His words have driven a flight into perceived haven assets on Wednesday, which has given the US Dollar a general lift. The market had been hunkered down to await the US Federal Reserve’s monetary policy decision, which is due after the European market close later in the day.

The Fed is expected to raise rates by a full percentage point, with markets expecting more to come despite hope that, in the US at least, inflation may at least be coming under control. The European Union can look to no such succor as the war in Ukraine continues to boost energy and raw material prices across a continent still emerging economically from the Covid pandemic.

The European Central Bank has sounded more hawkish itself in recent weeks, but the overall market position is that the Fed retains by far the greater monetary firepower and leeway to deploy it. Signs that the war in Ukraine will be drawn out further can only strengthen this view

EUR/USD Techincal Analysis

EUR/USD Chart Prepared by David Cottle using TradingView

How To Trade EURUSD

The 0.9909-0.98614 region which held Euro bears in check through the early days of September appears to be holding them again for moment, with little obvious appetite to push the single currency below the 0.99 psychological handle for very long. However, this is not likely to prove very durable in the face of a concerted downside test. However, given such a lack of fundamental support, a more hawkish Fed later in the session could well provide the impetus for just such a move. The powerful downtrend line from February 21 remains very much in place, and totally dominant. Indeed, it currently provides what’s likely to be very strong resistance way above the current market at 1.01351, and it’s very hard to see from where Euro bulls will find the will to even approach that anytime soon.

The downtrend itself is only a sharpening of the move lower in place since January 7.

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