- A stronger dollar pushes EUR/USD below parity again.
- Intraday outlook favors the dollar, although the price remains in the recent range.
- European and US bond yields continue to rise.
EUR/USD was unable to break above 1.0050 and reversed direction, falling to 0.9970, the lowest level in two days. The pair remains below parity with a very short-term negative bias against a stronger dollar.
Inflation in EZ and employment in the US
On Wednesday it became known that inflation in the Eurozone reached a new all-time high, with the annual rate rising to 9.1% in August, higher than the expected 9%. This contributed to adding to the expectations of a more aggressive rise in interest rates by the European Central Bank, when it meets next week. The core index went from 4% to 4.3%. The foregoing caused the yields of European bonds to continue rising and therefore, giving support to the euro. Comments in favor of hikes by ECB officials, such as Nagel, also continue.
In the US, the report of August ADP Employment, the first with a new methodology. The data will serve as a preview for the official employment report for August, with non-farm payrolls. Wednesday will also be the Chicago PMI and Raphael Bostic of the Atlanta Fed, Loretta Mester of the Cleveland Fed and Lorie Logan of the Dallas Fed will speak.
A negative factor for the euro is the energy crisis in Europe. Gazprom, the Russian company stopped the shipments of natural gas to the French Engie SA due to a disagreement over payments. The Russian also reported that it will stop shipments to Germany through the Nord Stream gas pipeline for three days due to maintenance tasks.
Euro loses momentum, but not support
EUR/USD’s recovery from the lows in years failed to confirm above 1.0050. If this level is clearly broken, the euro could extend the upward trend, with a target at the 20-day moving average at 1.0105.
The bullish bias carried by the EUR/USD has lost strength on Wednesday with the drop below the 20-hour moving average of 0.9995. To the downside, next support is seen at 0.9950, which protects the next 0.9900 zone.
Technical levels
Source: Fx Street
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