EUR/USD Falls Below Parity To Lowest Level In Two Decades
The EUR/USD pair broke below parity and hit its lowest level since December 2002 on Monday as the U.S. dollar continued to outperform most of its peers amid risk aversion.
While the greenback remains underpinned by the Federal Reserve's hawkish stance, the sentiment towards the euro has continued to deteriorate amid recession fears in the Union.
The EUR/USD hit its lowest intraday level in almost 20 years at 0.9926 and remains on track to close the day below 1.0000 for the first time since November 2002.
The dollar has continued to strengthen as the Fed tightening expectations continue to adjust. The market players are now betting a 54.5% chance of a 75 bps in the September meeting and 45.5% of a 50 bps increase, while a week ago, the odds were 39% and 61%, respectively.
Conversely, the euro depreciated further after the Bundesbank monthly report offered a worrisome outlook for Germany. The report stated, "German economic activity is likely to have more or less stagnated in Q2 of 2022" and that inflation will probably continue to accelerate to peak in double digits, around 10%, as the higher minimum wage and a weaker euro are causing price pressures. In that sense, the report noted that normalizing the ECB's monetary policy is appropriate as inflation risks remain highly elevated.
According to the daily charts, the short-term technical outlook for the EUR/USD remains clearly bearish. The RSI holds a negative slop below its midline and approaches oversold area, while the MACD prints higher red bars, indicating a growing selling interest.
Having fallen below the July low of 0.9952, the EUR/USD next support could be found at the 0.9900 psychological level. The lower end of a descending channel drawn from February highs could act as support at the 0.9750 area.
On the other hand, short-term resistances are seen at the 1.0000 level, followed by the 1.0100 zone and then the 20-day SMA, currently at 1.0180.
While the greenback remains underpinned by the Federal Reserve's hawkish stance, the sentiment towards the euro has continued to deteriorate amid recession fears in the Union.
The EUR/USD hit its lowest intraday level in almost 20 years at 0.9926 and remains on track to close the day below 1.0000 for the first time since November 2002.
The dollar has continued to strengthen as the Fed tightening expectations continue to adjust. The market players are now betting a 54.5% chance of a 75 bps in the September meeting and 45.5% of a 50 bps increase, while a week ago, the odds were 39% and 61%, respectively.
Conversely, the euro depreciated further after the Bundesbank monthly report offered a worrisome outlook for Germany. The report stated, "German economic activity is likely to have more or less stagnated in Q2 of 2022" and that inflation will probably continue to accelerate to peak in double digits, around 10%, as the higher minimum wage and a weaker euro are causing price pressures. In that sense, the report noted that normalizing the ECB's monetary policy is appropriate as inflation risks remain highly elevated.
According to the daily charts, the short-term technical outlook for the EUR/USD remains clearly bearish. The RSI holds a negative slop below its midline and approaches oversold area, while the MACD prints higher red bars, indicating a growing selling interest.
Having fallen below the July low of 0.9952, the EUR/USD next support could be found at the 0.9900 psychological level. The lower end of a descending channel drawn from February highs could act as support at the 0.9750 area.
On the other hand, short-term resistances are seen at the 1.0000 level, followed by the 1.0100 zone and then the 20-day SMA, currently at 1.0180.