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The pair will likely continue falling as sellers target the next important level at parity.
Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.000.
- Add a stop-loss at 1.0200.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.0170 and a take-profit at 1.0225.
- Add a stop-loss at 1.000.
The EUR/USD price came under intense pressure as investors reacted to the ongoing energy crisis in Europe and the upcoming Fed decision. It dropped to a low of 1.01200, which was the lowest level since July 19th. This price was significantly below last week’s high of 1.0275.
EU Energy Crisis and FOMC
The EUR/USD declined as investors rushed to the safety of the US dollar after the ongoing European energy crisis. On Tuesday, the European Commission voted to reduce gas consumption in the near term after Russia reduced its supply to the region to just 20%.
The implication of this measure will be dire for the region as winter approaches. For one, there are concerns about whether the bloc’s companies will maintain their competitive advantage since they have relied on cheap Russian gas for decades.
Russia slashed its supplies on the same day that data from Germany showed that sentiment among business leaders dropped to the lowest level since the pandemic started. Weak business sentiment usually leads to reduced investments and hiring.
The EUR/USD price declined even after the US published weak consumer confidence data. According to Conference Board, the country’s consumer confidence declined from 98.4 in June to 95.7 in July, the lowest point since the pandemic started. Additional data revealed that new home sales declined sharply in June.
It is against this backdrop that the Federal Open Market Committee (FOMC) will deliver its interest rate decision. Analysts expect that the bank will remain as aggressive as ever since the committee missed inflation when it was rising. They see it hiking rates by either 0.75% or 1%.
Still, there are signs that inflation may have peaked. For example, gasoline prices have slumped in the past few weeks. Other commodities like copper and iron ore have also declined.
EUR/USD Forecast
The EUR/USD pair continued dropping as the US dollar index held steady. It fell to a low of 1.0120 and crossed the important support at 1.0132. The pair moved below the Ichimoku cloud while the Relative Strength Index (RSI) continued its bearish trend. It also crossed the 25-day and 50-day moving averages.
Therefore, it seems like the recent rebound of the euro is fading. As such, the pair will likely continue falling as sellers target the next important level at parity.
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