Euro breaks parity, with EUR/USD, EUR/CHF and EUR/SGD providing potential shorting opportunities

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EURUSD breaks parity, with the euro looking at risk of further collapse. EURUSD, EURCHF and EURSGD look particularly interesting as shorting opportunities

Source: Bloomberg

 Joshua Mahony | Senior Market Analyst, London | Publication date: Monday 22 August 2022 

Euro at risk of prolongued collapse as inflationary pressures spell trouble

The euro is being hit hard today, with EUR/USD slipping below parity for the first time in a month. Perhaps more crucially, the pair now stands just above a fresh 19-year low. While we have seen a period of respite for stocks and the euro, things are clearly on the turn following the completion of earnings season. With electricity and natural gas prices soaring in Europe, the pressure continues to pile up on future growth prospects. Unfortunately, the fact that inflation lies at the centre of this crisis means that we are also expecting to see interest rates continue to rise within this recession.

With the ECB expected to continue driving rates higher in the face of economic collapse, we are seeing markets decline sharply today. Unfortunately, this collapse shows few signs of letting up, with the European exposure to dwindling energy imports from Russia raising the risk of a winter crisis in Europe. With that in mind, let’s look at some of the currency pairs that are at major long-term multi-year lows which could see selling ramp up once again.

EUR/USD

Eurodollar has tumbled back into the confluence of the July low and trendline support here. The wider perspective highlights how price is on the cusp of a fresh 19-year low, with precious little support down below if price follows through from here.

Source: ProRealTime

From a four-hour perspective, the pair closes in on the critical 0.9952 support level established on 14-July. The latest leg lower highlights the recent swing-high worth keeping an eye out for at 1.0203. Should we see price break up through that level we would be in a more positive view. However, until that happens, we are likely to see further weakness for EURUSD.

Source: ProRealTime

EUR/SGD

Asian currencies are particularly interesting, with the region awash with Russian exports that allow for lessened expectations of rampant inflation going forward. The Singapore dollar has massively strengthened against the euro over the past 14-months, with EUR/SGD losing 14% over that period. That drive through 1.4356 support brings us into a record low, raising the likeliness of further downside to come.

Source: ProRealTime

On the four-hour chart, we can see the short-term support level at 1.3969 which represents a major hurdle for bears to overcome. The break back below that level today brings a heightened opportunity for price to tumble further. To the upside, a push through the 1.4090 level would be needed to negate this current bearish intraday outlook.

Source: ProRealTime

EUR/CHF

The euro has been losing ground against the Swiss franc over the course of the past 16-months, with the pair losing 14% over that period. With each month that passes, we seem to post a new low for the pair. Aside from the huge volatility around the removal of the peg back in 2015, we are looking at record lows. That trend shows few signs of letting up, and thus it is worthwhile looking for further weakness for the pair.

Source: ProRealTime

Looking at the four-hour chart, there is a clear downtrend in play here. Utilising a standard deviation channel, we can see how consistent this sell-off has been over the past two-months. That channel remains in play and signals the potential for further downside. A break-up through the 0.9700 level negates that intraday view, with short positions favoured until that happens.

Source: ProRealTime