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Rising Gas Prices Put Pressure on the Euro

8/17/2022 12:31 PM

Since the beginning of the week, the European currency continues its downtrend, under pressure from rising natural gas prices and weak macroeconomic statistics. Now the quotes of the EUR/USD pair are in a corrective trend, trading around 1.0182.

Earlier, the governments of the eurozone countries adopted a resolution under which they will voluntarily reduce gas consumption by 15% until the end of March next year in order to reduce fuel shortages due to supply restrictions from Russia. Against the background of this decision, the prices for "blue fuel" are showing a sharp increase, at the moment reaching record March levels in the region of 2.6 thousand euros per 1.0 thousand cubic meters. In turn, macroeconomic statistics turned out to be quite weak: the August ZEW Survey on Current Situation in Germany fell to –47.6 points, and ZEW Economic Sentiment was –55.3 points, while the same indicator in the eurozone adjusted to –54.9 points from –51.1 points a month earlier.

As a result, the EUR/USD pair is declining, despite the similar dynamics of the US dollar, which is losing ground after the publication of a disappointing report on the real estate market: the number of Building Permits issued fell in July by 1.3% to 1.674 million from 1.696 million, and the volume of Housing Starts declined by 9.6%, amounting to only 1.446 million against 1.599 million a month earlier.

The EUR/USD pair is holding within the global downward channel, reversing to the downside again. Technical indicators, having reversed in the direction of growth, once again gave a signal to sell. The fast Alligator indicator EMAs crossed the signal line from above, and the histogram of the AO oscillator is forming descending bars approaching the transition level.

Support levels: 1.0111, 0.9951. | Resistance levels: 1.0260, 1.0406.

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