Euro Nears Parity with The Dollar
The euro is approaching parity with the dollar as investors fear that an oil crisis will cause the region’s economy to contract.
The euro sank to $1.0003 on Tuesday morning. The drop was due to fears that the Nord Stream 1 pipeline could stop operating permanently for repairs. The crucial pipeline carries natural gas from Russia to Europe.
Russia’s invasion of Ukraine in late February has raised concerns about Europe’s energy supply and harmed the region’s businesses, causing the euro to fall 12 per cent versus the US dollar this year. Expectations of future aggressive interest rate hikes by the US Federal Reserve are also weighing on the euro, propelling the currency higher. The drive toward euro-dollar parity is taking place because “recession in the eurozone is priced in.”
DXY
The dollar index rose 1.23 per cent overnight to 108.21, then gained 0.16 per cent in Asia to 108.38 as the euro and GBP continued to fall. Overall, the technical picture for the dollar index remains positive, albeit the daily relative strength index (RSI) is present in an overbought position, implying that a small downward correction is conceivable. After breaking out of a 5-year triangle in April at 102.50, the longer-term aim remains in the 1.1700 range. The nearest points of resistance are at 108.45 and 110.00. Support is at the 1.0585 breakout point, followed by 1.0500, 1.0350, and 102.50.
GBP/USD plummeted 1.19 per cent overnight to 1.1890, pulled down by the euro and a raging US dollar. There won’t be a new Prime Minister until early September; hence, the pound will remain under pressure. GBP/USD has fallen 0.20 per cent to 1.1867 in Asia. Immediate support can be found between 1.1860 and 1.1800, with 1.1400 as a medium-term goal. Resistance levels are clearly established at 1.2060 and 1.2200.
Despite falling US yields, the USD/JPY rose 0.98 per cent overnight to 137.40. Resistance for USD/JPY is at 138.00 and 140.00, with support around 136.00, 134.25, and 132.00.
