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Title: EUR/USD Parity Within Touching Distance as USD Surges Ahead of NFP

Jul 08, 2022 04:00AM ET

By: AnalysisWatch

The euro continues its sell-off into the weekend as the downtrend shows little sign of weakening. Worries about the euro continue to pile up, with the latest concern being the planned maintenance of the Nord Stream 1 gas pipeline, which facilitates the flow of natural gas from Russia to Germany and then to the EU. The pipeline is scheduled to undergo routine maintenance from July 11–21.

The pipeline has been identified as a major potential risk to the German economy and, by extension, the EU, should Russia cease gas supplies or deliver lower volumes than necessary.

At the same time, the minutes of the June FOMC meeting confirmed the Fed's determination to aggressively raise interest rates, even if this leads to a period of lower economic growth. This should support the dollar with its safe haven appeal at a time when recession fears are on the rise.

EUR/USD continues its slide, mainly due to the resurgence of the U.S. dollar, and could reach parity as early as today if the initial momentum is given a boost by the volatility of the U.S. NFP later in the day.

In the early hours of the London trading day, EUR/USD fell well above 1.0180 and moved towards parity. It should be noted that with the recent move, the currency pair is moving further into oversold territory, which could pose a challenge for further declines, at least until the NFP later. Psychological support is now at parity (1.000); resistance is at 1.0180, followed by 1.0310 and 1.0340.

Today, the US labor market data is due, which points to a possible disappointment. The manufacturing and services employment components of the PMI both moved into contractionary territory in June, while initial jobless claims have surprised negatively in three of the last four weeks.

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