The euro is in negative territory today, after posting six straight days of losses. EUR/USD is trading at 0.9553 in Europe, down 0.41%.

Referendums, Nord Stream explosions weigh on euro

September can’t end fast enough for the euro, which has declined a massive 4.8% against the dollar. Earlier today, EUR/USD fell to 0.9536, its lowest level since June 2002. With the war in Ukraine escalating and Nord Stream reporting that its pipeline was deliberately damaged, it’s hard to be optimistic about the euro’s outlook.

The sham referendums in Russian-occupied Ukraine have ended and predictably, the vote to join Russia was close to 100%. Moscow could announce as early as Friday that the territories are being annexed to the Russian Federation, sparking fears that Russia could resort to nuclear weapons to defend what it claims is Russian territory.

There was a further escalation in the Ukraine war last week, as explosions at the Nord Stream 1 and 2 pipelines are suspected to have been sabotaged. Nord Stream 2 has been shelved and Nord Stream 1 has been shut down for weeks, and any faint hopes that Russia might renew gas exports through Nord Stream have been dashed. European natural gas prices have jumped in response to the news.

The US dollar continues to rally, and 10-year Treasury yields pushed above 4.00% earlier today, for the first time since 2008. The markets are showing a healthy respect for Fed hawkishness, even after inflation weakened in the past two inflation reports. There is some optimism that the current rate-tightening cycle is reaching its end, with Fed member Evans stating that it will be appropriate to slow the pace of tightening at some point. For now, the US dollar has momentum, driven by an aggressive Fed and weak risk appetite.

EUR/USD technical

  • EUR/USD is testing support at 0.9554. Next, there is support at 0.9419.

  • There is resistance at 0.9640 and 0.9711.

EURUSD

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