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Euro Hit By Gas Disruption, Parity Breakdown At Risk – By ASC


EUR/USD ANALISIS

  • Russian sanctions burden the Euro.
  • EU GDP and inflation will be the focus next week.
  • Weak IG customer sentiment.

EURO BASIC FORECAST: MIXED

Gazprom and its subsidiaries in several European regions were hit by Russian sanctions last week, adding to increased pressure on the EU inflation and growth forecasts. This does not bode well for Euro though hawkish comments from several people ECB officers. The money market is now setting the price in about 85bps of the accumulated rate hike by the ECB for 2022 which could be the reason why we don’t see much in the way of Euro strength through hawkish ECB statements.

Next week’s economic calendar holds some important EU data including the CPI and GDP prints. GDP is forecast to lower QoQ, and may mimic the poor performance of UK growth figures leading to continued downward pressure for the EUR/USD pair.

EUR/USD ECONOMIC CALENDAR

Source: DailyFX Economic Calendar

TECHNICAL ANALYSIS

EUR/USD DAILY CHART

EUR/USD Price Forecast: Euro hit by Gas Outage, Risk Parity Breaking

Charts provided by Warren Venketas, IG

Price action on the daily EUR/USD chart shows Thursday a break below what appears to be bear flag support (blue) and further the psychological level of 1.0400. This now raises questions 1.0340 2017 swung low as the next call port for the bears. Pushing through this key area on the inflection can lead 1.0000 parity zones are considered and I don’t see much opposition to this belief in the coming weeks.

In the short term, there is a clear price increase difference with RSI (yellow) indicates a slow bearish momentum while the EUR/USD price is pushing lower. Traditionally, this indicates a looming increase but timing may be difficult to predict. I think dollars the rally needs to be withdrawn slightly before resuming the previous flow.

Resistance level:

  • 1,0600/20 days EMA (purple)
  • 1,0400

Support level:

  • 1.0340 – 2017 low swing
  • 1.0064 (76.4% Fibonacci)

IG CLIENT SENTIMENT DATA: BEARISH

IGCS shows retailers at the moment LONG on EUR/USDby 76% of traders who currently hold long positions (as of this writing). At DailyFX, we typically take views that are contrary to public sentiment resulting in a downward trend.

Contact and follow Warren on Twitter: @WVenketas

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