The dollar held steady against the other major currencies on the back of safe-haven flows, while the euro hovered near a two-decade low as Europe grapples with energy supplies and broader concerns about economic growth. The euro currency pair touched the EUR/USD support level at 0.9900, its lowest level since late 2002 and settles around the 0.9945 level at the time of writing the analysis, waiting for anything new.
Russia will cut off natural gas supplies to Europe via the Nord Stream 1 pipeline for three days at the end of this month, in the latest reminder of the precarious state of the continent's energy supplies. And the continent's heatwaves have already put pressure on energy supplies and fears are growing that any disruption during the winter months could be devastating to business activity.
Commenting on that, Ray Attrill, forex analyst at National Australia Bank NAB, said: "Given the current mood, there are clearly concerns about whether it will be three days or whether it will be three years." And "will it really just be a three-day maintenance or is this just another example of gas supplies to Europe being weaponized?"
In the same way, the performance of the dollar strengthened. The Japanese yen settled at 137.265 against the dollar after touching a one-month low of 137.705. Conversely, the Australian and New Zealand dollars were relatively flat, which NAB's Etrile attributed to drawing market attention to the weak outlook for Europe.
Dollar Rises Due to Risk Aversion, Euro Hits the Parity Price
- At the forefront of investors' minds were quick readings of manufacturing PMIs in the eurozone, UK and US, which will provide more clarity on the growth path for the respective economies.
- Investors are also awaiting the minutes of the European Central Bank's latest policy meeting on Thursday which is likely to look hawkish even as the continent faces a slowdown in growth.
Another reason investors have turned to the dollar is the growing risk of a hawkish message from the Jackson Hole meeting at the Federal Reserve, which many officials pointed to last week.In this regard, analysts at ANZ said "bonds sold led by the front". And "this is likely to be an expectation because the President's (Jerome) Bowl speech on Friday is likely to repeat the hard-line messages." Accordingly, yields on the standard 10-year Treasury bond rose by about 4 basis points for the week and reached 3.0165% last time. Two-year Treasury bond yields rose by about 5 basis points at 3.3102% as investors kept an eye on inflation and the Fed's watchdog situation.
Expectations of the Euro Against the Dollar
The control of the bears on the direction of the euro currency pair against the US dollar EUR/USD is still the strongest and despite the movement of the technical indicators towards sell saturation levels, but the continuation of the weak factors of the currency pair portends a stronger downward movement, the closest support levels for the euro dollar are currently 0.9875 and 0.9790 respectively. I expect the downward pressure on the euro against the other currencies to continue until the cutoff and the return of Russian gas to Europe again.
On the upside, there will not be a first break for the last move according to the performance on today's chart without moving the currency pair above the 1.0200 resistance. The currency pair will react today with the announcement of the readings of US durable goods orders along with pending home sales. Not to mention how willing investors are to risk or not.
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