Solid News

Eurozone Energy Crisis Intensifies

8/26/2022 11:35 AM

The European currency shows mixed trading dynamics, consolidating near 0.9960. Market activity remains low ahead of US Federal Reserve Chairman Jerome Powell's speech at the annual symposium in Jackson Hole. It is expected that the official may speak in favor of raising the interest rate in September by another 75 basis points (for the third time in a row), which will provide moderate short-term support to the US currency. Investors have no doubt that the regulator will continue a rather tight monetary policy, so the whole question is only in the pace of this tightening. Also, traders would like to hear updated forecasts regarding the prospects for economic growth.

The global economy continues to show a steady downtrend, and the widespread increase in interest rates is only exacerbating the situation caused by rising energy prices. In particular, it became known that a number of large industrial enterprises in Europe (zinc and aluminum plants) were forced to temporarily close due to a sharp increase in electricity tariffs. In addition, the downtrend is facilitated by reports of the Russian company PJSC Gazprom about stopping the pumping of "blue fuel" from August 31 to September 2 due to technical work on the turbine of the Nord Stream gas pipeline, which has been operating at only 20% of its planned capacity since the end of July. Experts doubt that infrastructure repairs will last only a few days, but European storage facilities are already 75% full. Despite this, German officials and, in particular, the Vice President of the Bundestag, Wolfgang Kubicki, declare the need to launch the Nord Stream 2 gas pipeline in order to prepare for the upcoming heating season. However, Chancellor Olaf Scholz opposed the idea, stressing that by the middle of next year the country will have the infrastructure to supply gas from alternative Russian sources.

In turn, the euro was moderately supported yesterday by optimistic macroeconomic statistics from Germany. The revised indicator of Gross Domestic Product (GDP) reflected the growth of the German economy in the second quarter by 0.1% (previously, zero dynamics were assumed), and excluding seasonal fluctuations, GDP in annual terms grew by 1.7% against the previous estimate of 1.4%.

Bollinger Bands in D1 chart demonstrate a moderate decrease. The price range expands from below, making way for new local lows for the "bears". MACD indicator is trying to reverse upwards and form a new buy signal (the histogram has to consolidate above the signal line). Stochastic is showing more active growth, signaling in favor of the development of the "bullish" trend in the ultra-short term.

Resistance levels: 1.0000, 1.0050, 1.0100, 1.0150. | Support levels: 0.9950, 0.9900, 0.9850, 0.9800.

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