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EUR/USD Looks Offered, Falls Below Parity

The duo slips and once again violates parity. On Monday, the dollar seems bought with rising US rates. Next up in ECB-speak is EMU Construction Output. At the start of the week, sellers take back control of the European currency and push EUR/USD down below the zone of psychological parity.

The EUR/USD will next find support near the 2022 low.

The weak performance in the risk complex and renewed purchasing activity around the dollar ahead of the Fed’s interest rate decision on Wednesday have caused the EUR/USD to reverse three straight daily advances so far and concentrate on the downside.

According to CME Group’s Fed Watch Tool, the likelihood of the latter is now hovering around 80%, while the likelihood of a 100 bps rate increase has recently lost steam.

The 10-year Bund rates on the German debt market are continuing their slow, multi-week uptrend and have so far flirted with the 1.80% range.

Construction Output in the Greater Euroland will be the sole release on the euro docket to be backed by statements by ECB officials E. Fernandez-Bollo, L. De Guindos, and A. Enria. The NAHB index due date is followed by the 3-month and 6-month Bill auctions in the US.

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What should I look for in the EUR?

Following increased caution and dollar purchasing ahead of the FOMC meeting, the EUR/USD stays under pressure and falls below the parity level (Wednesday).

The Fed-ECB difference, geopolitical concerns, fragmentation issues, and market activity surrounding the euro are now anticipated to closely follow dollar dynamics.

Concerns about a possible regional recession are now on the rise, and these concerns for the single currency are exacerbated by indicators of confidence that are declining and a probable slowdown in certain fundamentals.

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The ECB’s ongoing cycle of rate hikes is one of the pressing concerns on the back burner. late September elections in Italy. Risks of fragmentation exist when the ECB normalizes its monetary policies. Impact of the conflict in Ukraine and the ongoing energy shortage on the prognosis for inflation and growth in the area.

EUR/USD Levels To Monitor

The pair is now down 0.32 percent at 0.9979, and a break of 0.9944 (the week’s low on September 16) would lead to 0.9863 (2022 low on September 6) and eventually 0.9859. (December 2002 low). On the other side, the first resistance level appears at 1.0197 (monthly high September 12), then 1.0202 (high August 17), and finally 1.0310. (100-day SMA).

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