EURUSD Falls to Parity

Europe is in big troubles

According to the German ZEW headline figures, the Economic Sentiment Index decreased to -53.8 in July, which was lower than the predicted value of -38.3.

In July, the Current Situation sub-index was at -45.8 compared to estimates of -34.5.

The Eurozone ZEW Economic Sentiment Index for the current month showed a value of -51.1 as opposed to the previous reading of -28.0 and the anticipated reading of -32.8.

In the US, optimism among US small-business owners slumped in June to the lowest level since early 2013, according to the NFIB data, confirming the recession is already happening in the US.

“The worst-case (total stop of gas flows) brings recession and probably another 10% fall by the euro from here,” Societe Generale chief FX strategist Kit Juckes wrote in a note.

Bounce soon?

Since the euro is heavily oversold, the combination of the psychological level, the lower line of the downward channel, and oversold conditions could lead to some profit-taking, possibly starting a small relief rally, targeting 1.0360.

However, if the euro fails to defend parity, we might see another leg lower, targeting the 0.99 level.