The euro looks vulnerable amid the deepening EU energy crisis and risks to growth.
Fed minutes hinted at a possible slowdown in the pace of tightening amid rising risks to economic growth, sending the dollar briefly lower but followed by a recovery early in today’s session.
Meanwhile, the euro bore the brunt of weaker second-quarter GDP, which came in at 0.6% from 0.7%.
Today’s CPI data in the Eurozone shows an increase in consumer prices on an annual basis, but the data is fully in line with expectations, which is unlikely to cause movement on the part of the euro. The US unemployment report is expected today at 3:30 PM, which will provide guidance on the dollar’s next direction.
EUR/USD 1W CHART
On a weekly chart, the loss of the key support 1.0359 is critical for the euro especially after the bearish retest of the level. Prospects for the formation of a Bearish engulfing candle, with a sequential indication of the start of a new downward cycle, are being drawn, but this will be confirmed on the chart only after the closing of the weekly bar.
The Demarker Oscillator heads to the downside almost immediately after breaking out of the oversold zone, indicating weakness on the Euro side, despite indications of a likely reversal (the purple rectangle.)
If the dollar breaks parity this time, we will see extremely low levels for the euro with the possibility of reaching the lower limit of the great descending channel.
EUR/USD 1D CHART
On the daily chart, things are not looking good for the euro, especially after the failed attempt to break the stacked resistances and re-enter the larger descending channel. This suggests a continuation of the price in the south direction and a test of the zone around parity.
The price is at a key level around the bottom of the corrective channel, which coincides with the horizontal counter zone around 1.011 – 1.014. A breakout of the zone will signal the end of the correction and the beginning of a downward movement.
This is supported by the double downward counting sequence and the potential formation of a bearish engulfing candle, which will only be confirmed after the close of today’s session.
Banks’ expectations are a continuation of the decline this quarter and a bottom formation around the beginning of Q4, with the start of a new uptrend in Q1 and Q2.
Analysts’ expectations for the quarter are prices between 1.02 – 1.05 with a probability of falling to 0.99.
Analysts’ weekly expectations range between 1.0309 – 1.0049, with the highest estimates around 1.03.
Today there will be a statement from members of the ECB at 20:15 and the Fed at 20:20 and 20:45, which will provide guidance on the central banks’ monetary policy and potentially move the pair depending on the guidance.
Dealer Anatoliy Pavlov