Euro dips to $1.38

The EUR/USD is trading around the $1.38 level as traders return from the Easter holidays.

The euro is slightly lower versus the US dollar, with trading volumes and volatility low, as traders make their way back to the market after the long weekend.

The only economic announcement we are expecting from the eurozone is at 3pm (London time), when the consumer confidence report will be revealed. The European Central Bank has come under pressure lately, after weak inflation figures suggested the region was in deflation. The consensus is for a reading of -9 and if the report comes in below estimates, it could push the EUR/USD lower.

The situation in Ukraine is still hanging over the euro and as I previously stated, countries like Germany, France and Italy depend heavily on Russian energy. As long as tensions remain high in eastern Ukraine, the euro will find it difficult to reach $1.39. Traders are fearful that if violence breaks out, it could disrupt the supply of natural gas from Russia into the engine room of the eurozone.

If the consumer confidence figures come in worse than expected or if uncertainty in Ukraine increases, the EUR/USD could move towards the 200-day moving average of $1.3634.

Spot FX EUR/USD chart

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