EURUSD nears parity for the first time in 20 years
(XTB Analysis Team – XTB Poland)
EURUSD is in the center of attention today since after a months-long drop, the euro is nearing parity with the US dollar. It was almost 20 years ago when the main currency pair traded at 1.00 for the last time.
What are the reasons for the euro underperformance?
On one hand, implications of the Russia-Ukraine war play a big role. Energy prices in Europe spiked as gas flows were being limited and now there is a real risk of complete halt to gas supply from Russia as tensions continue to escalate and after the “temporary” shutdown of Nordstream 1. This would most likely lead to a recession on the continent, especially in gas-dependent countries like Germany.
Another reason for the weak performance of the common currency is the European Central Bank, which has been very slow compared to other major central banks when it comes to policy tightening and is yet to deliver its first rate hike. Meanwhile, the Fed embarked on an aggressive rate hike cycle in an attempt to contain rampant inflation, providing support for the US dollar, which is also benefiting from safe haven flows. As a result, EURUSD keeps moving lower.
However, traders should expect some support around the 1.00 area due to the psychological nature of this level which could lead to some efforts from buyers.
EURUSD Forecast: Can buyers continue to defend parity?
(Eren Sengezer – FXStreet)
– EUR/USD has extended its slide toward parity early Tuesday.
– The pair remains extremely oversold in the short term.
– Dollar could preserve its strength if safe-haven flows continue to dominate the markets.
EUR/USD has dropped within a couple of pips of the all-important parity level early Tuesday after having lost more than 1% on Monday. The pair is struggling to shake off the bearish pressure in the risk-averse market atmosphere but the near-term technical outlook points to extreme oversold conditions.
Renewed coronavirus-related lockdowns in China and heightened fears over the energy crisis deepening in Europe force investors to seek refuge. The dollar continues to benefit from safe-haven flows with the US Dollar Index advancing to its strongest level in nearly two decades above 108.00.
German Economy Minister Robert Habeck said on Monday it would be difficult to say whether Nord Stream 1 gas pipeline would come back online after the scheduled maintenance. “We have to be prepared for various outcomes, including shipments not being renewed after maintenance,” Habeck added.
Later in the session, the IBD/TIPP Economic Optimism Index and the NFIB Business Optimism Index will be featured in the US economic docket. On Monday, the Federal Reserve Bank of New York’s latest Consumer Survey of Consumer Expectations revealed that the US Consumers’ one-year inflation expectations rose to 6.8% in June from 6.6% in May. Additionally, White House Press Secretary Karine Jean-Pierre told reporters that she expects the new Consumer Price Index (CPI) data to be “highly elevated.”
Unless the US data point to a surprising improvement in business sentiment, investors are likely to stay away from risk-sensitive assets in the second half of the day.
EURUSD Technical Analysis
The Relative Strength Index (RSI) indicator on the four-hour chart dropped all the way to 20 and EUR/USD trades near the lower limit of the descending regression channel coming from late June. Both of these technical developments how extremely oversold the pair in the near term. Hence, sellers could move to the sidelines and wait for a technical correction before continuing to short the pair.
On the upside, 1.0050 (static level, mid-point of the descending channel) aligns as first hurdle ahead of 1.0075 (upper limit of the descending channel) and 1.0100 (psychological level, 20-period SMA).
In case 1.0000 (psychological level) fails, the next bearish targets are located at 0.9950 (static level from November 2002) and 0.9900 (psychological level).
GBPUSD outlook: Pound extends weakness, pandemic low comes in focus
(Slobodan Drvenica – Windsor Brokers)
Cable hit new lowest since March 2020, in extension of Monday’s 1% drop, with close well below 1.20 handle and former lows at 1.1958/30 (Sep 2019 / Oct 2016 lows respectively) and fresh extension lower on Tuesday, signaling that bears regained control.
Pound is pressured by rising dollar and risk aversion, which add to negative internal factors – political turmoil and slowing economic growth in Britain that raises threats of recession.
Daily techs show rising negative momentum and moving averages in full bearish setup that supports the action for final push towards Mar 2020 low (1.1409).
Price adjustments are expected to remain below strong barriers at 1.2000/13 (psychological / falling 10DMA) and offer better levels to re-enter bearish market.
Res: 1.1909; 1.1939; 1.2013; 1.2055.
Sup: 1.1807; 1.1727; 1.1669; 1.1611.