Forex Market: EUR/USD near fresh 20-year trough on energy woes, recession fears bolster greenback

EUR/USD was trading near its weakest level since June 2002 on Wednesday, as rising interest rates globally reinforced recession concerns, propelling the safe haven US Dollar to a new 20-year peak against peers.

The yield on benchmark US 10-year Treasuries exceeded 4% for the first time since 2010, while 2-year yield was at 4.28%.

“It’s a combination of the spillover from the UK… where the gilt yields have gone ballistic. And that has spilled over into other DM bond markets, so there’s a bit of a ricochet effect,” Moh Siong Sim, a currency strategist at Bank of Singapore, was quoted as saying by Reuters.

“And of course … this is against the backdrop of a very determined message by the Fed to do whatever it takes to bring inflation down.”

Yesterday Chicago Fed President Charles Evans said the US central bank would have to raise interest rates to a range between 4.50% and 4.75%, additionally reinforcing the Fed’s hawkish message.

Meanwhile, additional pressure on the single currency came after the latest developments in the Euro Area’s gas crisis. Germany, Denmark and Sweden reported that attacks had led to major leaks into the Baltic Sea from the Nord Stream 1 and 2 pipelines.

Swedish and Danish prime ministers said the leaks were obviously a result of deliberate actions, probably sabotage.

According to Germany’s Economy Minister Robert Habeck, the leaks resulted from targeted attacks on the infrastructure and Berlin was now certain that “they were not caused by natural occurrences or events or material fatigue.”

Russia, which cut gas deliveries to Europe following Western sanctions, also said the leaks were possibly the result of sabotage and they undermined Europe’s energy security.

As of 8:53 GMT on Wednesday EUR/USD was edging down 0.46% to trade at 0.9549. Earlier today, the major Forex pair slipped as low as 0.9536, which has been its weakest level since June 19th 2002 (0.9515).

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.9611
R1 – 0.9653
R2 – 0.9713
R3 – 0.9754
R4 – 0.9796

S1 – 0.9551
S2 – 0.9509
S3 – 0.9449
S4 – 0.9389