EUR/USD OUTLOOK:
- After suffering heavy losses in recent months, the euro[1] appears to be stabilizing against the U.S. dollar[2]
- In the last couple of days, EUR/USD[3] has managed to reclaime parity and is tentatively moving towards a key resistance
- The euro’s fundamentals remain weak, but its recent bounce could pick up pace if European natural gas[4] prices continue to correct lower
Most Read: US Dollar Price Action Setups - EUR/USD, AUD/USD, USD/CHF and USD/JPY [5]
The EUR/USD[6] has plummeted in 2022, sinking more than 12% since January to lows not seen in decades. Since the end of the first quarter, the downtrend has worsened due to the fallout from the war in Ukraine, which has created a major energy crisis in Europe, sending regional natural gas prices to record highs [7]earlier this month and increasing the likelihood of a painful recession.
Although risks to the outlook are tilted to the downside for the 27-country bloc, it appears that the euro has begun to stabilize against the U.S. dollar around the parity mark in recent days, as European natural gas prices have come off record levels, with the Dutch benchmark futures down more than 20% from their August peak.
DUTCH NATURAL GAS FUTURES (INVERSE) VS EURUSD
Source: TradingView [8]
The corrective move in this fossil fuel market has been driven by news that stockpiles in Germany and other countries are being replenished faster than planned, a situation that lessens the need for winter rationing measures to counter potential shortages. Rationing is an extreme step that could severely undermine industrial production and thus economic activity.
With natural gas storages being filled ahead of schedule, despite reduced Russian
