EUROPEAN STOCKS RETREAT AS ENERGY CRISIS CONTINUES

European equities declined sharply on Tuesday as investors remained concerned about the surging energy costs in the region. In Germany, the DAX declined by 0.81% while the FTSE 100 and CAC 40 indices fell by 0.40% and 1.38%, respectively. This drop happened as the price of crude oil jumped to the highest level in more than three years. Similarly, natural gas prices also rose to a multi-year high and analysts believe that the trend will continue ahead of winter. The UK has been one of the most affected countries as many petrol stations have run out of stock.

The price of crude oil rose sharply as investors price in more demand for oil in the coming months. Brent, the global benchmark, rose to more than $80 per barrel while West Texas Intermediate (WTI) rose to more than $76. Investors believe that a mismatch between demand and supply will keep prices elevated for a while. While demand is rising, OPEC and its allies have continued with their gradual pace of supply increases. Some analysts believe that oil will rise to as much as $100 per barrel. In a note made on Monday, analysts at Goldman Sachs said that oil prices will rise to $90 in the fourth quarter.

The US dollar index held steady ahead of the Congressional testimonies by Jerome Powell and Janet Yellen. The two are expected to talk about the state of the American economy and what to expect soon. Yellen will reiterate her call for Congress to pass a bill that will prevent a government shutdown. In his prepared statement, Jerome Powell will reiterate that inflation is higher than expected but that it will normalize in the coming months. The testimony comes a few days after the Fed delivered its interest rate decision.

EURUSD

The EURUSD sell-off intensified on Tuesday ahead of key testimonies by Powell and Yellen. The currency pair is trading at 1.1675, which is lower than last week’s high of 1.1752. On the four-hour chart, the pair is approaching the lower side of the descending channel. It has also moved below the 25-day and 50-day moving averages while the MACD has moved below the neutral level. Therefore, the pair will likely keep falling as bears target the next key support at 1.1600.

USDJPY

The USDJPY pair continued its parabolic rally as the US dollar momentum continued. The pair rose to a high of 111.42, which was the highest level in several months. On the hourly chart, the pair is above the short and longer-term moving averages. It is also along the upper line of the Bollinger Bands while the Relative Strength Index (RSI) has been rising. Therefore, the pair will likely keep rising in the near term.

UK100

The FTSE 100 index declined to a low of £7,020 as the energy crisis continued. On the daily chart, this price is below the key resistance level at £7,225. It has formed a double-top pattern and moved slightly below the 25-day moving average. The MACD is also slightly below the neutral level. Therefore, the index will likely remain in this range as the focus remains on energy.