EUR/USD Forecast: Battle around parity continues, bulls to be disappointed

EUR/USD Current Price: 1.0021

• Turmoil in Europe adds pressure on the shared currency, Italian PM Draghi to resign.
• The US Producer Price Index jumped by 11.3% YoY in June, higher than anticipated.
• EUR/USD bounced from a fresh multi-year low of 0.9951, but bears retain control.

The EUR/USD pair plunged to 0.9951, a fresh multi-year low, now recovering above parity. Speculative interest turned into safety amid persistent fears of recession, triggering a stock market sell-off. Fears temporarily cooled in the American session as Federal Reserve Governor Christopher Waller noted that markets may have gotten ahead of themselves by pricing a 100 basis points rate hike in July, adding that a 75 bps hike will bring them to neutral.

Turmoil in Europe added to the shared currency’s weakness. Gazprom, the Russian energy giant, said that it would not guarantee to resume the functioning of the Nord Stream 1 pipeline after it was shut down for repairs. German Economy Minister Robert Habeck said that the uncertainty around gas deliveries “is clouding the economic outlook considerably heading into the second half of the year.” Also, Italian Prime Minister Mario Draghi announced he is resigning.

On the data front, Germany published the June Wholesale Price Index, which rose by 0.1% MoM and by 21.2% YoY. As for the US, the country released Initial Jobless Claims for the week ended July 8, up by 244K, above the 235K expected. Also, the June Producer Price Index inflation hit 11.3% YoY, while the core reading in the same period eased modestly to 8.2%. On Friday, the focus will be on US Retail Sales, seen rising by 0.8% MoM in June.

EUR/USD short-term technical outlook

The EUR/USD pair is bearish according to technical readings in the daily chart. However, an intraday recovery ahead of the close and extreme oversold conditions hints at a corrective advance.  Still, technical indicators continue to head south at multi-month lows while moving averages stand far above the current level, in line with the dominant downward trend.

Technical readings in the 4-hour chart show that bears retain control as the 20 SMA heads lower while providing intraday dynamic resistance at the 1.0030 level. The Momentum indicator eases below its midline, while the RSI bounced modestly from oversold readings, not enough to support a firmer recovery.

Support levels: 0.9990 0.9950 0.9910

Resistance levels: 1.0050 1.0120  1.0165

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