EUR/USD Trend Forecast, MT4.MT5 Financial News

Eurozone energy problems intensify

 

EUR/USD fell sharply by 1.45% yesterday to 1.0033, its lowest level since late 2002, and was at 1.0005 at one point, not far from parity.

 

As the Nord Stream 1 enters a 10-day annual maintenance from July 11, the market's fears that Russia may shut down its natural gas pipeline indefinitely has been a major factor driving the continued weakness of the euro.

 

If Nord Stream 1 does go out of service as feared by the market following the end of maintenance on July 21, European gas could continue to rise exponentially, further adding to inflationary pressures in Europe.

 

In addition, Europe faces massive gas shortages that could prompt authorities to impose fuel rationing and, in the worst case, brief plant closures to reduce energy consumption ahead of winter, a move that will pave the way for a possible deep recession flat road.

 

EUR/USD is likely to continue to weaken until the market learns more about Russia's next plans. At the same time, the US June inflation data to be released this Wednesday may make the EUR/USD worse. In the context of the continued surge in gas station prices in early June, the US inflation rate in June may increase to 9% year-on-year.

 

Further upward inflation data will undoubtedly provide sufficient reasons for the Fed to raise interest rates by 75 basis points at the end of July, which will continue to widen the monetary policy differences between the European Central Bank and the Federal Reserve. Will remain strong, EUR/USD falling below parity is a high probability event.

 

EUR/USD technical analysis

 

EUR/USD has fallen to a near 20-year low, and it is necessary to look for key technical levels on the monthly chart. Although there is currently no relevant support near the price, parity may be a potential lower limit.

 

If prices accelerate below this level, EUR/USD could slide to around 0.9625 (January 2001 high) in the third quarter. On the other hand, if the bulls come back and push the move back, initial resistance area is around 1.0350 (January 2017 low) and then 1.0665 (March 2020 low).