FX.co ★ EUR/USD. Gas valve and euro: bears open new price horizons

The EUR/USD pair has changed its price level. Over the past two weeks, traders have been trading within the range of 0.9950–1.0050, while at the moment they have gone down a step lower, defining the boundaries of the corridor at 0.9870–1.0000. It is getting harder and harder for buyers to keep the pair above the parity level, while sellers are gradually opening up new price horizons. For example, yesterday, they tested the 98th figure for the first time in 20 years, reaching 0.9879. In this price area, the initiative was intercepted by EUR/USD bulls, but the upward momentum almost immediately faded away.

This suggests that the pair is still dominated by bearish sentiment. In general, the strongest support level at the moment is at 0.9810, which is the lower line of the Bollinger Bands indicator on the weekly and monthly charts. Therefore, the sellers of the pair have a free hand—it is advisable to open short positions on corrective pullbacks against the backdrop of strengthening greenback and weakening euro. In the current conditions of a fundamental nature, it is not necessary to talk about a possible trend reversal.

Firstly, in the current realities, this can only happen due to the devaluation of the dollar, whereas before the September Fed meeting, the greenback will stay afloat due to strong hawkish expectations (the probability of a 75-point rate hike is now estimated at 60%). Secondly, the dollar is also in demand as a protective tool against the background of the worsening energy crisis in the European region. The EUR/USD downward trend is based on these two whales. All other fundamental factors are of secondary importance. For example, the growth of European inflation did not help the euro. Even hawkish signals from a number of ECB representatives (who advocated raising rates by 75 points in September) were actually ignored by the market. Traders got off with only a formal and short-term correction, although the meeting of the European Central Bank will be held the day after tomorrow, that is, on September 8.

Meanwhile, the flywheel of the energy crisis continues to spin. Yesterday, at the opening of trading, the gas price in Europe immediately jumped by 35%, exceeding $3,000 per thousand cubic meters. To date, the price has corrected, but this fact should not be interpreted in any other way as a correction since the root of the problem is not resolved and is unlikely to be resolved in the near future.

So, this week, Russia officially announced that the Nord Stream 1 gas pipeline was suspended indefinitely due to European sanctions. According to Dmitry Peskov, press secretary of the President of the Russian Federation, the sanctions of the West "made the system of servicing gas pumping units inoperative: the gas pipeline turbine is not being repaired." This suggests that the problem is not only technical but also political (or rather, geopolitical) in nature.

It is also worth noting that last week the prices for blue fuel on European exchanges fell significantly against the reports that the EU countries filled storage facilities ahead of schedule with gas—by an average of 80%—although this figure was planned only by November. However, even this argument now looks doubtful. Journalists from the German agency Redaktionsnetzwerk Deutschland (RND) published the results of a study that turned out to be very pessimistic. It turned out that even if Germany reaches the planned gas reserves by November (95% of the filled storages), this will not solve the problem of the heating season.

According to experts, last season such a volume of blue fuel reserves was used in Germany in just two months—in January-February of this year. From this, it is concluded that the Germans will, in any case, have to rely on gas imports. However, its cost and whether it will be in sufficient quantities on the market is unknown. Experts warn that during the autumn-winter period, Europeans may face not only a reduction in industrial production, but also power outages, the cost of which will also increase many times over.

Such gloomy and, at the same time, very realistic prospects put quite a lot of pressure on the euro. But the dollar, in turn, is the beneficiary of the current situation, using increased demand, including as a defensive asset.

It is noteworthy that today's corrective momentum faded around the 0.9980 mark, the Tenkan-sen line on the daily chart. Although, in my opinion, the resistance level is located a little higher, at the parity level. Nevertheless, the fact that buyers of EUR/USD are now unable to even impulsively overcome the 1.0000 mark looks quite indicative. Traders settled within the new price tier, allowing themselves to sell below parity.

All this suggests that short positions are still in priority for the pair. It is advisable to open sell deals on upward pullbacks to the parity level or slightly higher, to the levels of 1.0020, 1.0050. In this case, the downward targets will be 1.0000, 0.9950, 0.9900.