Bearish view
- Sell the EUR/USD pair and set a take-profit at 0.9950.
- Add a stop-loss at 1.050.
- Timeline: 1 day.
Bullish view
- Set a buy-stop at 1.0100 and a take-profit at 1.0150.
- Add a stop-loss at 1.000.
The EUR/USD price crashed to parity level as investors continued worrying about the European economy. The pair also sunk ahead of the upcoming American consumer inflation data. It has fallen by over 12% in 2022, making it one of the worst years for the euro in decades.
US inflation data ahead
The euro continued its downward trend against the US dollar as investors worried about the European energy crisis. The Nord Stream 1 gas pipeline was halted this week for maintenance and there are worries whether Putin will restart it soon. Besides, Russia has already slashed the amount of gas it sends to Europe substantially this year.
Russian gas has been an essential part of the European economy for decades. Countries like Germany depend mostly on this gas to power their large industrial bases. Unlike gas from other countries, Russian gas flows through pipelines, making it substantially cheaper. Therefore, there are concerns about the new normal where these countries start buying gas from countries like Qatar and Australia.
Therefore, consumer and business confidence has declined sharply in the past few months as inflation has remained at elevated levels. As such, there are concerns about whether the European Central Bank (ECB) will manage to lift-off without causing a severe recession.
The next key catalyst for the EUR/USD pair will be the latest American consumer inflation data. Economists polled by Reuters expect that the headline CPI rose on a MoM and YoY basis as the price of food and gasoline rose. They see the two rising to 1.1% to 8.8%, respectively.
On the other hand, analysts expect that core inflation declined from 6.0% to 5.7%. While these numbers are important, they will likely not change the outlook of the Federal Reserve. Analysts expect that the FOMC will hike interest rates by 0.75% this month.
EUR/USD forecast
The EUR/USD pair dropped to the pivotal level of 1.000 as the euro sell-off gained steam. The pair is now trading at 1.0053, which is still below the 25-day and 50-day moving averages. On the four-hour chart, the pair has moved lower than the pivotal level of 1.0360, which was the lowest level in June.
Therefore, the pair will likely keep falling as sellers target the next key support at 0.9950. The decline will happen as bears get more comfortable with the pair below 1.00.
