Slobodan Drvenica
Windsor Brokers
EUR/USD
The Euro is hovering just above parity level for the third consecutive day, with this critical support being dented but bears were so far unable to break lower.
Limited upticks show that downside pressure is strong, though headwinds from parity manage to counter the pressure.
The single currency is at the lowest levels in two decades and overall picture is very negative, and its fate is mainly with the situation regarding the energy supplies.
The pair is down around 11% year-to-date and on track for further weakness in current economic and geopolitical conditions that may result in one of the biggest yearly drops in Euro’s history.
Higher than expected US inflation in June sparked speculations that the US Federal Reserve might act even more aggressively in its July policy meeting and opt for 1% rate hike, instead of widely expected 0.75% increase that additionally supports the dollar.
On the other side, the situation in European Union worsened further, according to the latest economic indicators, which signal that bloc’s economy is sliding into recession.
The core problem for the union is the energy supply and soaring prices of gas and oil that fuels inflation and the problem spills all over the economy.
The latest shut of gas supplies through Nordstream 1 pipeline, due to maintenance, undermined the Euro, with growing fears that shutdown may not be temporary, add to negative outlook, highlighting increased risk that the single currency may slump below parity and extend towards next target at 0.9607 (Sep 2002 low), with risk of deeper fall if the situation deteriorates on further rise of gas prices.
The European central bank is in difficult position, facing an important task to combat record-high inflation, which could worsen if the euro weakens further, but on the other side must be cautious as aggressive policy tightening could negatively affect the economic growth.
Res: 1.0070; 1.0121; 1.0180; 1.0221.
Sup: 1.0000; 0.9944; 0.9859; 0.9607.
Interested in EUR/USD technicals? Check out the key levels
The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.
Recommended Content
Editors’ Picks
EUR/USD holds steady above 1.0650, awaits US data and Fed verdict
EUR/USD is trading sideways above 1.0650 amid a softer risk tone and broad US Dollar strength on Wednesday. With European markets closed for Labor Day, the pair awaits the US employment data and the Fed policy announcements for the next directional move.
GBP/USD flatlines below 1.2500 ahead of US data, Fed
GBP/USD is off the lows but stays flatlined below 1.2500 early Wednesday. The US Dollar strength caps the pair's upside amid a cautious mood ahead of the top-tier US employment data and the all-important Fed policy announcements.
Gold price remains on tenterhooks with eyes on Fed policy decision
Gold price hovers below $2,300 as uncertainty ahead of the Fed’s policy announcements improves the appeal of the US Dollar and bond yields. The Fed is expected to support keeping interest rates at their current levels for a longer period.
A new stage of Bitcoin's decline
Bitcoin's closing price on Tuesday became the lowest since late February, confirming the downward trend and falling under March and April support and the psychologically important round level.
ADP Employment Change Preview: US private sector expected to add 179K new jobs in April
The ADP report is expected to show the US private sector added 179K jobs in April. A tight labour market and sticky inflation support the Fed’s tight stance. The US Dollar seems to have entered a consolidative phase.