Further Sell-Off Likely on EU Risks

The pair will likely keep falling as the risks to the European economy continues.

Bearish View

• Sell the EUR/USD pair and set a take-profit at 1.0500.
• Add a stop-loss at 1.0610.
• Timeline: 1 day.

Bullish View

• Set a buy-stop at 1.0600 and a take-profit at 1.0700.
• Add a stop-loss at 1.0500.

The EUR/USD price crashed to the lowest level in five years as concerns about the Eurozone economy continued. The pair fell to a low of 1.0513, which was significantly below its highest level this year.

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Concerns About the Eurozone economy

There are serious concerns about the Eurozone economy as the energy crisis continued. On Wednesday, the price of European natural gas prices surged to an all-time high after Russia’s Gazprom stopped supplying oil to Poland and Bulgaria.

The company insisted that it will restart its supplies only if these countries start paying in rubles. Therefore, the EUR/USD declined because analysts expect that Russia will impose the same restrictions for other European countries like Germany and France. As such, there are risks that the European economy will experience a major recession this year.

Therefore, investors believe that the European Central Bank (ECB) will be slow to end its stimulus in a period of stagflation. On the other hand, the Federal Reserve is expected to continue being more aggressive by hiking interest rates and starting its quantitative tightening (QT) policy.

The pair also declined as investors rushed to the safety of the US dollar as the number of Covid-19 cases kept rising in China. Officials there have announced some strict measures, including lockdowns and strict testing. As a result, there is a likelihood that the global economy will see some weakness in the coming quarters.

The EUR/USD declined as the US dollar continued its strength. The dollar index moved above $102 as the currency rose against other key currencies like the Japanese yen, Swiss franc, and sterling.

The next key data to watch will be the second estimate of the US Q1 GDP data. The first estimate showed that the economy expanded by 7.6% in Q1. The pair will also react to the ECB bulletin and the bloc’s consumer and business sentiment data.

EUR/USD Forecast

The EUR/USD pair continued its bearish trend as risks to the global economy continued. It fell to a low of 1.0507, which was the lowest level in five years. It is slightly above the third support of the standard pivot points. It also moved slightly below the 25-day and 50-day moving averages. Also, the pair is along the lower side of the Bollinger Bands.

Therefore, the pair will likely keep falling as the risks to the European economy continues. The key support level to watch will be at 1.0500.