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Hi, dear traders! On Tuesday, EUR/USD returned to the retracement level of 261.8% (1.0196), bounced downwards and began to fall towards 1.0080. There has been no significant events on the economic calendar on Monday and Tuesday, followed by a couple of notable data releases. In the UK, inflation hit 10.1%, which sent the pound sterling downwards. It seems that the pound sterling's slump has also pushed the euro down as well – EUR moved downwards at the same time as the UK currency right after the UK data was released. At the same time, Europe is facing a massive natural gas crunch. The EU is set to shift away from Russian oil and gas and plans to fully modernize its energy supply system.
Achieving this task would take years, and the EU is making a gradual transition from Russian fossil fuels. However, Europe cannot find an easy replacement for Russian natural gas supply, unlike oil. EU officials have repeatedly stated that the European Union cannot give up Russian gas immediately, and even 1-2 years would be insufficient. The EU, wary of Moscow squeezing Europe's gas supply, is now filling up storages for the winter and tries to reduce gas consumption. Economists believe the EU economy could still face energy shortages during the winter, which would weigh down on industrial output, consumption, and lead to a recession. At this point, an interest rate hike is not the only thing that could put pressure on the European economy.
According to the H4 chart, the pair reversed downwards and settled below the retracement level of 127.2% (1.0173). The pair failed to settle above the descending trend channel, indicating that traders are bearish on EUR/USD. EUR/USD can continue its decline towards the Fibo level of 161.8% (0.9581). The indicators show no signs of emerging divergences today.
Commitments of Traders (COT) report:
In the last week covered by the report, traders opened 8,396 Long and 4,121 Short positions, indicating that major players have become slightly less bearish on EUR/USD. The number of opened Long positions is now about 200,000 against 234,000 Short ones. Although the pair's chances for growth have steadily increased over the last weeks, the latest COT reports have indicated that bulls have not managed to improve their situation. The euro has failed to rise significantly in the last 5 weeks. EUR/USD is likely to resume its decline in the future.
US and EU economic calendar:
EU: Q2 GDP data (09-00 UTC).
US - Retail Sales (12-30 UTC).
US - FOMC Meeting Minutes(18-00 UTC).
The events on the economic calendar could significantly influence traders today.
Outlook for EUR/USD:
Earlier, traders were recommended to open new short positions if the pair settles below 1.0196 on the H1 chart, with 1.0080 being the target. These positions can be kept open. EUR/USD is very likely to slide down – going long on the pair is not recommended.
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