EUR/USD slips and fades with the EU energy crisis; Focus on US inflation data
- EUR / USD Falling Monday, hitting its lowest level in nearly two decades and shrugging off exchange parity
- Fears of Russia indefinitely shutting off gas supplies to the EU seem to be one of the main bearish drivers for the EUR.
- US CPI data for June will steal the spotlight this week. The report may act as a bullish catalyst for the US dollar if inflation continues to rise
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The euro took different directions at the start of the week, taking heavy losses against the US dollar amid risk-off sentiment and widely DXY Energy. In the middle of the day, the EUR/USD pair fell 1.1% to 1.0069but earlier in the day it was down by 1.3%, they overlook exchange rate parity for the first time since then late 2002.
Several catalysts weighed on the single currency on Monday, but the main bearish driver was concerns that President Putin’s government would cut some key energy exports to the European Union. PAO Gazprom temporarily Nord Stream 1 . Close, the largest single pipeline carrying Russian gas to Germany, for annual maintenance. Although flows are expected to resume within 10 days, investors expect the Kremlin to use the situation as an excuse to restrict gas supplies indefinitely in response to sanctions imposed by the West in the wake of the invasion of Ukraine.
If Nord Stream 1 remains out of service after the maintenance period scheduled to end on July 21, natural gas prices will likely continue to rise. exponentially It may have even surpassed the record for the month of March, exacerbating the inflationary environment in Europe. This scenario will also create a formidable Gas shortage In the region, prompting authorities to implement fuel rationing and, at worst, order brief factory closures to reduce energy consumption as winter approaches, setting the stage for what could be a deep recession.
The danger of economic war will be on the minds of every trader and scale down Euro in the coming days so market participants will have a better idea of what Russia plans to do next. Developments on the other side of the Atlantic, specifically in the United States also The bearish bias for the EUR/USD is strengthening. US consumer price index data for June, because offor chest on me Wednesday, is expected to appear Annual inflation acceleratesa job for a new cycleHigh near 9% on the back of higher prices at the pump.
Hot red CPI printing will fix case Another 75 basis points to raise the interest rate At the FOMC meeting in July and possibly September, as policymakers start to act more Strongly for bullish inflation surprises. The difference in monetary policy between the Fed and the European Central Bank, along with significant downside risks to eurozone growth, will ensure that the US dollar maintains its leadership in the FX space, a situation that may lock the EUR/USD around parity in the near term.
Technical analysis of the EUR/USD pair
After the recent drop in the EUR/USD pair, prices have fallen to multi-decade lows near 1.0000. To know the main technical levels that will be played, it is necessary to refer to monthly Schedule. despite There are no relevant support areas in the vicinity, parity may act as a floor, but if sellers can break through this area on the downside, traders should prepare for the possibility of a move towards 0.9625 during the third quarter. On the flip side, if the falling buyers come back and trigger a bullish reversal considering the oversold condition of the market, initial resistance appears at 1.0350. For more strength, focus shifts upwards to 1.0665.
EUR/USD Technical Chart
EUR/USD chart created using TradingView
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— By Diego Coleman, Market Strategist, DailyFX