- Investors are awaiting eurozone flash PMIs for signs of a recession.
- High energy prices are putting pressure on businesses in the eurozone.
- According to a Reuters poll, the Fed will raise rates by 50bps in September.
Today’s EUR/USD forecast is bearish as recession looms over Europe. Although board member of the European Central Bank Isabel Schnabel could not completely rule out a technical recession in the 19-country bloc in an interview with Reuters last week, this week’s Eurozone flash PMIs will be eagerly examined for signs of a possible recession.
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After S&P Global’s final composite PMI index plunged to a 17-month low in July, the statistics for August, which are anticipated on Tuesday, may show another month of loss in business activity.
The euro, which fell to a five-week low on Monday, could face more bad news if it continues to deteriorate.
Businesses in the eurozone are already under pressure from high energy prices and shortages. The latest setback comes from Russian state-owned energy company Gazprom, which has announced it will stop supplying natural gas to Europe for three days at the end of the month.
Unplanned maintenance on the Nord Stream 1 pipeline, which crosses the Baltic Sea to reach Germany, intensifies the energy impasse between Moscow and Brussels, which has already increased the possibility of rationing and recession while driving up inflation in the area.
European gas costs are already very close to five-month highs. With winter approaching, Europe is rushing to refuel.
On the other hand, according to most analysts in a Reuters poll conducted from August 16 to 19, the benchmark interest rate will go up by half a percentage point to between 2.75 and 3.00 percent next month.
EUR/USD key events today
There are no significant news releases from either the US or Europe today. The pair will likely react to macroeconomic events.
EUR/USD technical forecast: Eying below parity level
Looking at the 4-hour chart, we see the price trading below the 30-SMA and the RSI trading in the oversold region showing bears are in charge of the market. The price is very close to parity and must only move slightly lower.
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At this point, bulls might come in because the RSI is in the oversold region. If bulls come into the market, the price might retrace the recent move and retest resistance at 1.01007.
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