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 As Nord Stream 1 Shuts Down
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 maintenance days. 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 weaponizing energy exports to Europe. The predictable result has been renewed fears of an energy crisis, which sent the euro to a 20-year low of 0.9876 earlier today.
Even if Moscow does restore service, this episode reminds us of Europe’s energy dependence on an unreliable Russia. Germany has dramatically reduced its dependence on Russian gas, from 55% before Russia’s invasion of Ukraine to just 26%. Still, 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 many releases out of Germany and the eurozone today, and the weak data didn’t help the euro. Eurozone and German Services PMIs 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 315k new jobs, edging above the forecast of 300k. The reading will enable the Fed to continue its aggressive rate-tightening cycle as it relies on a robust US labor market.
EUR/USD Technical View
- EUR/USD is testing support at 0.9888. Below, there is support at 0.9816
- There is resistance at 0.9984 and 1.0056
