Euro hits 20-year low on oil shutdown

The euro fell below the 0.9900 line earlier in the European session but has pared its losses. Currently, EUR/USD is trading at 0.9937, down 0.19%.

Euro falls on Nord Stream 1 shutdown

US markets are closed for the Labour Day holiday. A US holiday often means a quiet day for the currency markets, but not today. Last week, investors were warily keeping an eye on the latest energy crisis development in Europe. Russian officials shut down the Nord Stream 1 pipeline on Wednesday, citing the need for three days of maintenance. Saturday came and went, and the pipeline remains closed, with Moscow now claiming an oil leak in a turbine. Germany has countered that the pipeline is fully operational, stoking fears that Russia is again weaponising energy exports to Europe. The predictable result has been renewed fears of an energy crisis, which sent the euro to a new 20-year low of 0.9876 earlier today.

Even if Moscow does restore service, this episode is a reminder of Europe’s energy dependence on an unreliable Russia. Germany has greatly reduced its dependence on Russian gas, from 55% prior to Russia’s invasion of Ukraine to just 26%, but if Russia chooses to play hardball and cut off gas supplies, the result will be a full-blown energy shortage for Europe this winter.

There were a host of releases out of Germany and the eurozone today, and the weak data didn’t help the euro at all. Eurozone and German Services PMIs both weakened in August with readings of 49.8 and 47.7, respectively. This points to a contraction in business activity. Eurozone Sentix Investment Confidence remains in deep freeze, and fell to -31.8, down from -25.2 and below the forecast of -27.5. Finally, eurozone retail sales declined -0.9% YoY in July, following a -3.2% reading in June (-0.7% est.)  The soft numbers point to weakness in the German and eurozone economies.

The highly-anticipated US nonfarm payrolls on Friday turned out to be a whimper rather than a bang, as the economy produced a solid 315 thousand new jobs, edging above the forecast of 300 thousand. The reading will enable the Fed to continue its aggressive rate-tightening cycle as it relies on a robust US labour market.

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EUR/USD Technical

  • EUR/USD is testing support at 0.9888. Below, there is support at 0.9816
  • There is resistance at 0.9984 and 1.0056

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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