EUR/USD Forecast: Euro could find it hard to benefit from risk flows

EUR/USD has lost its bullish momentum after having climbed toward parity in the early European morning and declined toward 0.9950. Although there is a positive shift witnessed in risk mood on Tuesday, the shared currency could have a difficult time staying resilient against the greenback.

Investors grow increasingly concerned over a deepening energy crisis in Europe following Gazprom's decision to halt gas supplies. Earlier in the day, Gazprom Deputy CEO Vitaly Markelov said Nord Stream 1 pipeline will not be launched until Siemens Energy replaces the faulty equipment. This statement comes after Siemens said it had not been asked to do the job and clarified that sanctions do not prohibit maintenance.

Meanwhile, European Central Bank (ECB) Governing Council member Martins Kazaks said on Tuesday that a broad and protracted recession in the eurozone could force the ECB to slow its rate hikes, not allowing the shared currency to gather strength.

Ahead of the ISM Services PMI data from the US, US stock index futures are up between 0.4% and 0.7%. In case there is a steady rebound in Wall Street's main indexes, the pair's losses could remain limited in the near term but market participants could opt to stay on the sidelines ahead of the ECB's policy announcements on Thursday.

The headline Services PMI is forecast to edge lower to 55.5 in August from 56.7 in July. The Prices Paid component is expected to rise to 76.5 from 72.3. In case the survey points to increasing price pressures in the service sector, the dollar could gather strength and further weigh on the pair in the second half of the day.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the four-hour chart edged lower after having climbed above 50 during the Asian trading hours, reflecting the buyers' unwillingness to commit to additional euro gains. Currently, the pair is trading at 0.9950, where the 20-period SMA is located. In case this level turns into resistance, additional losses toward 0.9900 (psychological level) and 0.9880 (September 5 low) could be witnessed.

On the other hand, EUR/USD faces immediate resistance at 0.9980 (50-period SMA) ahead of 1.0000 (psychological level, Fibonacci 23.6% retracement of the latest downtrend) and 1.0025 (100-period SMA).