By
Bhushan Akolkar
August 21st, 2023
Analysts have also observed that the momentum indicator of the EUR/USD daily chart keeps getting to a negative level.
The EUR/USD pair is currently trading at an asking price of 0.95. According to analysts, the worsening European energy crisis has been the major factor weighing down on the currency. It can be recalled that some leaks were detected in the Nord Steam pipelines. Euro is expected to plunge even further as no estimation has been made on when the gas transportation will be restored.
According to the Danish Energy Agency, this is not a small crack, and there could be a possibility of sabotage. Analysts have also observed that the momentum indicator of the EUR/USD daily chart keeps getting to a negative level. RSI on the other hand has lost its downward strength. As of press time, it was consolidating around 24. The moving average also indicates sellers’ dominance as it keeps going lower.
Analysts at Fxstreets also noted that technical indicators moved away from oversold levels. However, it still sits below the midlines with no directional momentum. 20 SMA on the other hand has its bearish slope intact. According to them, the resistance levels are 0.9630 0.9680 0.9725 while the support levels are 0.9550 0.9505 0.9470.
Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, have also noted that the EUR/USD pairs could fall to the 0.9500 zone next week. According to them, its trading range of 0.9567 and 0.9670 was narrower than the expected consolidated range of 0.9560/0.9700. Because downward momentum is building again, EUR is likely to drop to 0.9530.
“Our latest narrative from Monday (26 Sep, spot at 0.9630) still stands. As highlighted, the impulsive and outsized drop from last Friday suggests EUR could continue to weaken, possibly to 0.9500. Overall, the weakness in EUR from 2 weeks ago is intact as long as EUR does not breach 0.9750 (‘strong resistance’ level was at 0.9770 yesterday),” predicted the analysts for the next one to three weeks.
Economists at Nordea also observe that the currency could hit 0.90 once it falls into the 0.95 zone.
According to them, the energy crisis would have to be resolved for the Euro to bounce back. They also predicted that the energy crisis impact would continue to affect the industrial sector, causing negative terms of trade reactions in the eurozone.
“Goods that were previously produced in Europe will now have to be imported from countries elsewhere where energy prices have not risen as much as in Europe. Worsening terms of trade argue for a weaker euro ahead,” they said.