• The EUR/USD rate remains stable under downward pressure below the parity rate though, there is little hope that even a significant hike in interest rates might rescue it.
•  The euro-dollar pair’s losses this week reached the support level of 0.9900, the lowest in 20 years, and it is settling around the 0.9970 level at the time of writing the analysis.
• The currency pair may remain stable around its losses until important and influential events, led by the announcement of the US economic growth rate today, and then the Jackson Hole symposium.

Rather than monetary policy, it is the interrelated threats of a recession and a Russian energy halt that are weighing on the single European currency – the euro -, according to analysts. Although traders are now preparing for a one-percentage point rate hike by October, such dynamics are difficult for the ECB to contend with, even if it uses the kind of massive moves in borrowing costs that the Federal Reserve recently enacted.

Investors are boosting the European Central Bank’s bets and are pricing in one point of the gains by October. “Price has not been in the driving seat in the forex markets, particularly in the last month – and it really is about the dynamics of global growth,” said Sam Ziv, FX analyst at JPMorgan Private Bank. They are not supportive of currencies when they are made to keep inflation expectations steady and hurt growth expectations at the same time.”

Borrowing Costs are Raised

Facing the fastest rate of inflation since the introduction of the euro, the European Central Bank raised borrowing costs for the first time in more than a decade last month, raising its deposit rate by half a point to 0%. As investors anticipate another move of this magnitude on Sept. 8, storm clouds are converging over the 19-nation eurozone economy, as the cost-of-living crisis and Russia’s invasion of Ukraine put pressure on households and businesses.

Business surveys released Tuesday by S&P Global showed activity contracting for a second month, with the pandemic rebounding in areas like tourism almost to a halt. Meanwhile, a weak euro, which hit a two-decade low against the dollar this week, is boosting inflation by making imports more expensive – a particular concern when most of the region’s inflation is driven by energy that is largely priced in dollars. The bleak background means that even an unprecedented three-quarters of a point rate hike will not beneficially boost the euro, according to Dirk Schumacher, economist at Natixis in Frankfurt.

Indeed, ECB Executive Board Member Fabio Panetta on Tuesday urged caution in planning next steps as the prospect of a downturn in the eurozone becomes more likely than ever. “If we had a big slowdown or even a recession, that would ease inflationary pressures,” he added at a panel discussion in Milan. However, colleague Isabel Schnabel acknowledged the negative impact of a weak currency on inflation expectations, telling Reuters that it is all the more important when the economy faces an energy price shock. Money markets priced a half-point increase next month and put odds of 20% at 75 basis points. Moreover, traders are betting 130 basis points to tighten by the end of the year, with the deposit rate eventually rising to 2% by September 2023.

Euro forecast against the dollar:

I still see that the EUR/USD may hold on to its recent losses until the reaction from the Jackson Hole symposium. It is clear that he is ignoring the results of the US economic data and focusing more heavily on that seminar. The general trend of the EUR/USD pair is still bearish and stability below the parity price will move the bears towards stronger support levels, the closest to them currently are 0.9920, 0.9855 and 0.9790, respectively.

On the upside and according to the performance on the daily chart, breaking the resistance 1.0200 will be important to breach the sharp bearish channel recently. Today, the euro will be affected by the announcement of the growth rate of the German economy, along with the reading of the Ifo index, and the US dollar will be affected by the announcement of the growth rate of the US economy and the number of jobless claims.

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• The Dow Jones Industrial Average closed with a rise in its recent trading at the intraday levels, to break its longest losing series in a month.
• It achieved gains in its last sessions by 0.18%, to gain about 59.64 points.
• It settled at the end of trading at the price of 32,969.24, after its decline in the day’s trading. Tuesday and for the third consecutive session, a rate of -0.47%.

18 of the index’s 30 components advanced, with Salesforce Inc. increased by 2.28%, before the company reported diluted earnings for its fiscal second quarter late Wednesday of $1.19, down from $1.48 a year earlier. Revenue was $7.72 billion in the quarter ended July 31, up from $6.34 billion a year earlier.

Dow Jones Economic Data

New orders for durable goods held steady in July after rising 2.2% in June, missing expectations for a 0.8% increase in a Bloomberg survey.

While the National Association of Realtors’ pending home sales index fell 1% in July, a smaller-than-expected gain, pending sales fell nearly 20% from a year earlier.

Investors are now focused on the Jackson Hole symposium that begins Thursday, with a speech from Federal Reserve Chairman Jerome Powell on Friday likely to provide more clues about the pace of future rate hikes, and whether the central bank can achieve a “soft landing” for the economy.

Technical Outlook

Technically, the index with its recent rise is trying to compensate for part of what it incurred from previous losses. Att the same time it is trying to discharge some of its clear oversold by the relative strength indicators. This is in light of the stability of its trading below the level of 33,240, and under the control of the bearish trend in the medium term along a slope line. You can see this in the attached chart for a period of time (daily). In front of these negative pressures, we find it moving above its simple moving average for the previous 50 days, which gives it some positive momentum.

Therefore, our expectations suggest a return to the index’s decline during its upcoming trading, especially throughout its stability below the resistance level 33,240, to target the support level 32,272.65.

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For the second day in a row, the price of the USD/JPY currency pair is trying to recover higher with gains to the resistance level of 133.90 today. This is after strong selling recently that pushed it towards the 130.40 support level, the lowest in two months. We recently witnessed an uprising of the Japanese yen against the other major currencies. The US dollar has fallen since the recent policy update of the US Federal Reserve, in addition to the announcement that the US economy has entered a recession.

Dollar Economic Data

US employers recorded fewer job openings in June as the US economy faces severe inflation and rising interest rates. US job vacancies fell to 10.7 million in June from 11.3 million in May, the Labor Department said. Jobs, which did not exceed 8 million in the previous month last year, exceeded 11 million per month from December through May before declining in June.

The number of Americans who left their jobs fell slightly but remained high at 4.2 million in June, while layoffs fell to 1.3 million from 1.4 million in May, the Labor Department said in its monthly survey on job opportunities and employment turnover.

The US labor market has been resilient so far this year, and companies have complained of difficulty filling vacancies: employers added an average of 457,000 jobs per month in 2022; US unemployment is near its lowest level in 50 years. This is one reason why many economists believe that the US economy has not yet gone into a recession even though GDP, the broadest measure of economic output, has shrunk for two consecutive quarters – a baseline for the onset of the downturn.

The Labor Department’s July jobs report, released on Friday, is expected to show employers processed another 250,000 jobs last month, a number that would be fine in normal times but the lowest since December 2020, when the global economy was devastated. from the epidemic. Economists also expect US unemployment to remain at 3.6% for the fifth consecutive month, according to a survey by data company FactSet.

The US economy is under pressure as the Federal Reserve raises interest rates to combat inflation, which is running at the fastest pace in four decades.

Forecast of the US dollar against the yen:

On the daily chart below, USD/JPY is trying to return to the vicinity of the general bullish trend and that may happen if the bulls move in the currency pair towards the resistance levels 134.60 and 136.00 respectively. On the other hand, and as I mentioned in the recent technical analyses, it will be important to break the psychological support level of 130.00 to turn the general trend into a bearish one. The US dollar will be affected today by the announcement of the ISM Services Purchasing Managers’ Index reading.

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Spot natural gas prices (CFDS ON NATURAL GAS) resumed their decline in recent trading at intraday levels, to record daily losses until the moment of writing this report, by -4.60%. It then went to settle at the price of $8.028 per million British thermal units, after rising during trading on Friday. By 1.52%, during the past week the price rose by 1.50% after the price reduced its early gains at the beginning of the week, while during the month of July the price rose sharply by 54.26%.

Strong demand for cooling in the US led to a strong advance in spot prices on Monday and Tuesday, but prices fell in the last two days of the week ahead of expectations of a lack of summer heat over the weekend, but that was not enough to erase early gains during the week .

Russia and Gas Production

Earlier this week, Kommersant daily reported on Monday, citing informed sources, that Russia increased its daily oil and gas condensate production in July by 2% from the previous month to 1.468 million tons, or 10.76 million barrels per day.

Russian oil production fell sharply after Moscow faced Western sanctions when it sent troops into neighboring Ukraine in February, but production has gradually begun to increase over the past months but is still below pre-sanction levels.

Russia has again reduced gas flows to Europe through the Nord Stream 1 pipeline over the past week from 40% to only 20% of its capacity. Russia’s state-owned Gazprom has blamed delays in equipment deliveries linked to Western sanctions imposed to protest the Kremlin’s invasion of Ukraine, though analysts viewed the move as retaliation for the sanctions.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, collectively known as OPEC+, will by August fully cancel record production cuts since the outbreak of the COVID-19 pandemic in 2020.

Natural Gas Technical Forecast

Technically, the recent decline in natural gas comes as a result of the stability of the pivotal resistance level 9.60, to reap the profits of its previous rises. It also tries to gain positive momentum by searching for a bullish bottom to take as a base that might help it recover its recovery and rise again. It is trying to drain some of its saturation of the clear buying of the relative strength indicators, especially with the influx of negative signals from them.

All of this comes in light of the dominance of the main bullish trend over the medium and short term along a slope line, as shown in the attached chart, with the continuation of positive support for its trading above its simple moving average for the previous 50 days.

Therefore, our expectations still suggest a return to the rise of natural gas during its upcoming trading, especially if the support level 8.054 remains intact, to target the pivotal resistance level 9.60 again.

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The euro fell to its lowest level since 2002 against the dollar, and it is falling against the pound sterling and other major currencies. This comes amid a sharp deterioration in investor sentiment towards the euro zone as gas prices rose after recent reports of the closure of a major gas pipeline transit. Accordingly, the EUR/USD pair moved towards the 1.0235 support level, which is stable around it at the time of writing the analysis.

The Euro was sold off strongly. The drop in the euro against the dollar means that some banks are now charging below par for some international payments. London remains the largest forex trading center in the world, and big moves in forex often happen when the market opens. The sale of the single European currency comes amid rising gas prices in Europe with fears that Germany will be particularly exposed, given its unhelpful source of energy production: France has large nuclear capacity, and Germany is shutting down its nuclear power plants.

The headlines ahead of yesterday’s London opening confirmed that European gas imports have shrunk further with the Yamal-Europe pipeline being shut down. The data showed that the German gas transporter Gaskid said that exit flows at the Malno measuring point on the German border fell to zero after it flowed earlier at 2190136 kWh.

For its part, the International Energy Agency says in its latest gas market review, that the share of Russian gas (including LNG) meeting total EU demand increased from 30% in 2009 to 47% in 2019. The report adds that the strong flow of gas LNG in 2020, amid increased global supply, reduced the share of Russian gas to about 40%, adding that it remained at a similar level in 2021, driven by Gazprom’s strategy of reducing short-term sales to the bloc. Despite the availability of excess supply capacity and the possibility of achieving high returns in the export markets.

This strategy appears to be working again: Yamal’s shutdown comes a day after gas prices rose on news of an industrial strike at Norwegian gas fields. At the moment, this appears to be a Euro-specific problem since the market has not penalized the GBP to the same degree. The UK is also facing a slight rise in gas prices, but it should be noted that for some time the foreign exchange markets have been trading the narrative that the UK is the biggest victim of this energy crisis. And it is close to the price of the pound now.

Adding some pro-sterling sentiment was the top revision of final June PMI data for the UK, according to the tabulated data release by S&P Global. This confirms how sentiment towards the EUR currently appears to be shifting among investors. Commenting on this, Ulrich Leuchtmann, Head of Foreign Exchange and Commodity Research at Commerzbank, said: “The gas supply crisis will be a Europe-specific problem. And if things go that bad, it will only affect Europe, it will only affect the monetary policy of the European Central Bank, and therefore it will be a reason for the characteristic weakness of the euro.”

Meanwhile, money markets are showing a rapid reassessment of the number of interest rate increases that the European Central Bank will introduce over the coming months. As a result, German 10-year bond yields fell sharply amid this recalibration. The lower yields automatically pull support away from the Euro as investors look for better returns in other markets.

Eurozone bond yields rose sharply during the spring period as the European Central Bank made a “hardcore” shift in guidance and confirmed that it would raise interest rates in July and then again in September. This has been proven to support the euro exchange rates. However, given the magnitude of the pressures facing the Eurozone economy, the market is betting that the first rally will be 25bp rather than 50. The total number of hikes that the ECB will be able to deliver is also dropping. Accordingly, the euro could reach the dollar to 1.02 as the trade deficit increases.

The Eurozone’s new trade deficit with the rest of the world is one reason to expect further weak performance in the Euro, according to currency analysts.

Where is the Euro 2022 heading after the recent losses?

After the recent losses of the EUR/USD currency pair, speculations increased that the price of the most popular currency pair in the currency market might move towards the parity price once the support level 1.0200 is breached. Taking into consideration that the recent losses pushed the technical indicators towards strong oversold levels. But the factors for the US dollar’s gains are still the strongest, and the euro lacks the momentum to stop the pace of its losses. On the other hand, and according to the performance on the daily chart below, the bulls need to breach the 1.0620 and 1.0800 resistance levels to make a change in the current general bearish trend. The currency pair will react strongly today with the announcement of the contents of the latest meeting minutes of the US Federal Reserve.

We expect the continuation of this corrective decline.

Spot natural gas prices (CFDS ON NATURAL GAS) declined in their recent trading at the intraday levels, to record daily losses until the moment of writing this report, by -1.44%. It settled at the price of $6.094 per million British thermal units, after falling slightly during trading on Friday. By -0.15%, during last week’s trading, the price incurred sharp losses for the second week in a row, by -11.51%.

Nymex July gas futures settled on Friday at $6,220/MMBtu, down just 1.9 cents on the day/day. This is after prices took a hit when it was verified that an outage at a major US export terminal could significantly increase inventories.

NGI’s Spot Gas National Avg spot gas prices also continued to decline amid mild temperatures in several parts of the US, dropping by 41.5 cents to settle at $5,980.

Meanwhile, US Federal Reserve officials maintained their hawkish rhetoric with San Francisco Fed President Mary Daly saying on Friday that another 75 basis point rate hike in July is the “starting point”. But markets backed off bets on sharp interest rate hikes.

Russia finally seemed poised for its first sovereign debt default in decades, with some bondholders saying they did not receive late interest on Monday after the main repayment deadline expired the day before.

Technically, natural gas is trying in its recent trading to correct the main bullish trend in the medium term in light of its trading along a major bullish trend line. This is shown in the attached chart for a period of time (daily), where the price suffers in its recent trading from the continuation of negative pressure. It is trading below the simple moving average for a period of 50 previous days. We notice in the midst of this that the RSI indicators reached oversold areas, exaggeratedly compared to the price movement.

Therefore, and amid successive losses for the price in its recent short-term trades, we expect the continuation of this corrective decline, especially throughout its stability below the resistance level of 6.361, to target the first important support levels at the price of 5.660.

We expect the stock’s decline to return during its upcoming trading.

The Dow Jones Industrial Average rose during its recent trading at the intraday levels, to achieve gains in its last sessions, by 2.15%, to gain about 641.47 points. It settled at the end of trading at the level of 30,530.26, after declining in Friday’s trading by -0.13%.

US stocks bounced back from last week’s selling, with government bond yields rising as risk-off sentiment subsided on Tuesday, with all sectors posting gains led by energy, consumer appreciation and consumer goods.

St. Louis Fed President James Bullard warned that inflation expectations could become unchecked without credible action by the Federal Reserve, a credible action by the US Federal Reserve, which could lead to a new regime of high inflation and volatile real economic performance.”

On Tuesday, Richmond Fed President Thomas Barkin called Fed Chair Jerome Powell’s guidance that the US central bank will likely raise interest rates by 50 or 75 basis points in July as “reasonable.”

In other economic news, the pace of US existing home sales fell 3.4% to 5.41 million at a seasonally adjusted annual rate in May, data from the National Association of Realtors showed on Tuesday. The expected drop was 5.4 million in a Bloomberg poll. After four consecutive declines, sales were the lowest since June 2020 and were down 8.6% from the previous year.

Technically, the index is trying to compensate for part of what it incurred from previous losses. At the same time it is trying to drain some of its clear oversold by the relative strength indicators, especially with the emergence of a positive crossover in them. All of this comes in light of the control of the short-term bearish corrective trend along a slope line, as it is shown in the attached chart for a period of time (daily). This is with the continuation of the negative pressure of its trading below the simple moving average for the previous 50 days.

Therefore, we expect the stock’s decline to return during its upcoming trading, especially throughout its stability below the resistance level 31,000, to target the support level 28,658.

The Dow Jones Industrial Average declined during its recent trading at the intraday levels, to record losses in a session characterized by volatility by -0.13%. It lost about -38.29 points and settled at the end of trading at the price of 29,888.79. This is after its increase in its decline in trading on Thursday amounted to -2.42 %. During the past week the index recorded losses for the third consecutive week, by -4.79%.

Global financial markets moved in an attempt to price the latest action from the Federal Reserve last week, when the Federal Reserve raised the US benchmark interest rate by 75 basis points. This dampened inflation expectations and possibly restoring some credibility to the institution, however the effect was on stock markets.

Next week’s data will reveal more information on growth rather than inflation as has been the case for the past two weeks.

Last Friday morning, investors heard Chairman Jerome Powell deliver an opening speech at the opening conference on the international roles of the US dollar. Mostly about the dollar’s role as the world’s reserve currency, his comments did not offer new insights into the prospects for monetary policy.

Minneapolis Federal Reserve Chairman Neil Kashkari said in a blog Friday that he could support a 75 basis point rate hike in July. He wrote that a “prudent strategy” after the July meeting would be to continue raising interest rates by 50 basis points until inflation is “on course to fall” to 2%.

Technically, the index continues to decline along with a bearish corrective trend line in the short term, as shown in the attached chart for a period of time (daily). This is with the continuation of negative pressure for its trading below the simple moving average for the previous 50 days. In front of that we notice the beginning of a positive crossover on the RSI indicators, after reaching oversold areas, which helped limit the index’s recent losses.

Therefore, our expectations indicate that the index will continue to decline during its upcoming trading, as long as the main resistance 31,000 remains intact, to target the support level 28,958.

Our expectations suggest a return to the index’s decline during its upcoming trading.

The Dow Jones Industrial Average rose during its recent trading at intraday levels, to break a series of losses that continued for five consecutive sessions, achieving gains in its last sessions by 1.00%. It gained about 303.70 points and settled at the end of trading at 30,668.54, after its decline during Tuesday’s trading by -0.50%.

Investors seemed comfortable that the US central bank had met market expectations that it would act aggressively to tame rising inflation, and for now seemed comfortable with the Fed’s prediction that the economy was likely to slow in the next two years. The Federal Reserve raised its interest rate by 75 basis points on Wednesday, the largest such increase in nearly 30 years, as the central bank quickly cools inflation that has reached four-decade highs that have proven difficult to tame.

In a statement, Fed officials said they now expect the central bank’s policy rate to rise to around 3.4% by the end of this year, while 2023 ends near 3.8%. They also expect the economy to slow to a 1.7% growth rate this year.

Federal Reserve Chairman Jerome Powell said during his press conference that the Fed hopes to rely on the data at some point. This means that with slowing economic growth and inflation, the Fed may consider slowing the pace of interest rate hikes, as it tries to avoid pushing the economy into recession.

Economic data on Wednesday showed US retail sales fell below expectations by 0.3% in May, while sales excluding autos rose 0.5%, and excluding autos and gas sales rose 0.1%.

Technically, the index is trying with this rise to compensate for part of what it incurred from previous losses. At the same time, it is trying to discharge some of its clear oversold by the relative strength indicators, especially with the beginning of the emergence of a positive crossover in them. This is in light of the dominance of the short-term corrective bearish trend along a slope line, with the negative pressure continues for its trading below the simple moving average for the previous 50 days.

Therefore, our expectations suggest a return to the index’s decline during its upcoming trading, especially throughout its stability below the resistance level 31,000, to target the support level 29,550.

As I mentioned since the start of this important week’s trading, the US dollar will remain the strongest until the reaction to the most important event this week passes, which is the monetary policy decisions of the Federal Reserve. EUR/USD Losses extended towards the support level 1.0396, which is close to breaching its lowest level during 2022. It is settling around 1.0420 at the time of writing the analysis.

The Euro did not benefit much from the announcement that the ZEW economic sentiment reading rose to a four-month high of -28.0 in June from -34.3 in May. The reading was expected to rise to -27.5. The current situation index improved in May by 8.9 points to minus 27.6 points. The expected result was -31.0. Commenting on the results, ZEW President Achim Wambach said financial market experts are less pessimistic about the economy. Wambach added that the economy is still exposed to many risks, such as the effects of sanctions against Russia, the unclear epidemiological situation in China, and the gradual change in the course of monetary policy.

According to the reporter, economic confidence in the euro zone improved in June. The economic confidence index rose 1.5 points to -28.0. The status index rose by 8.6 points to a new level of minus 26.4 points. Moreover, the survey showed that inflation expectations in the euro zone fell again in June. The index came in at -32.4 points, which is 21.8 points lower than it was in May.

Earlier, the Statistics Office confirmed the rise in German inflation for the month of May. Consumer price inflation in Germany accelerated to 7.9 percent from 7.4 percent in April, driven by higher energy prices. Similar high inflation was last reported in the winter of 1973/74.

On the future of monetary policy: The European Central Bank is expected to raise interest rates in quarter-point increments after more than twice that planned volume in September, according to economists polled by Bloomberg. The European Central Bank pledged to raise borrowing costs for the first time in more than a decade in July, and respondents said it would raise them further at each of this year’s three remaining meetings.

After the larger step that policymakers began in September, they will return to smaller steps, including two in the first half of 2023 in February and June the survey showed. Faced with unprecedented inflation in the Eurozone of more than four times the 2% target, the European Central Bank is under pressure to raise the deposit rate from -0.5%. Once the increases kick in, investors see a more aggressive trajectory than economists – betting on 171 basis points to tighten by the end of the year.

According to the technical analysis of the pair: There is no change in my technical view towards the future price of the EUR/USD currency pair, as the general trend is still bearish. The bears are ready to move in prices towards lower support levels, and the closest to them are currently 1.0380 and 1.0290, respectively. Investors will not care much about the arrival of technical indicators towards strong oversold levels, especially if the US Central Bank’s decision today is in favor of further tightening its policy strongly throughout 2022.

On the upside, if the euro dollar gains some momentum to rebound, its first stop will be the resistance levels 1.0520 and 1.0665, respectively. The euro dollar gains will remain subject to sale as long as the divergence is strong between the European Central Bank and the Federal Reserve in the path of raising interest rates. Investors will not care as much about the results of China’s data, the eurozone, and even the US economic data, as much as they will be interested in the Federal Reserve’s announcement.