EURUSD PRICE REMAINS DEPRESSED BELOW 1.0150 AMID DAMP MOOD

• EURUSD is trading pressured as the US dollar looks to extend its recovery.
• Risk sentiment remains in a weaker spot so far this Tuesday amid growth worries.
• ECB decision, Russia’s Nord Stream 1 restart holds the key for the euro.

EURUSD price is off the lows but remains in the hands of sellers below 1.0150, as we progress towards early European trading. The upside correction in the main currency pair lost traction at 1.0200 the figure, as the market optimism seems to have vapored on resurfacing concerns over global growth.

The latest leg down in the major has reversed half the previous recovery rally, as EUR bears snapped the three-day upswing from almost twenty-year lows of 0.9952 reached last Thursday. The shared currency breached the critical parity level against the US dollar, marking a historic momentum after two decades.

Also Read: EUR/USD Weekly Forecast: Gear up for a too conservative ECB meeting

Demand for safe-haven dollar returns

The US dollar is looking to extend its recovery after kicking off the week on the wrong footing. Investors eye for safety once again, as growth fears resurfaced after a report that Apple Inc. will slow its hiring and spending unnerved markets in the US last session. Additionally, growing covid outbreaks in China and Shanghai’s widening mass testing have added to the cautious market mood. In times of uncertainty and panic, markets resort to the most sought-after safety net in the US currency.

The policy divergence between the Fed and the ECB remains one of the key factors undermining the euro. The contrast is only likely to widen further this Thursday when the ECB delivers on its pre-committed 25 bps rate hike, the first lift-off in 11 years. The Fed is set to increase the key rates by 75 bps next week, as it remains committed to fighting inflation head-on.

Russia’s Nord Stream 1 restart

Russia’s Nord Stream 1 pipeline restart is critical for the euro to sustain its recovery momentum. The Nord Stream 1 pipeline, Germany’s main source of Russian gas, is scheduled to be out of action until July 21 for routine work that the operator says includes “testing of mechanical elements and automation systems”. But markets remain suspicious about Russia’s intentions, particularly after Russia’s Gazprom last month reduced the gas flow through Nord Stream 1 by 60%. Should Russia delay the pipeline reopening, in response to the Ukraine crisis, it could escalate the dire gas situation in Europe, reviving the bearish interest in the shared currency.

EU, China to hold trade dialogue

The European Union (EU) and China will hold a high-level economic and trade dialogue on Tuesday amidst tensions over a number of issues including the war in Ukraine, Xinjiang and an as yet unratified investment agreement, per Reuters. “I look forward to co-chairing this important event together with China Vice-Premier Liu He,” Executive Vice President of the EU Commission, Valdis Dombrovskis tweeted out on Monday.

Eurozone final HICP

Eurozone final HICP (inflation) will be reported at 0900 GMT this Tuesday. The final revision will confirm the record high Eurozone inflation rate at 8.6% in June. Besides, the US will report the Building Permits and Housing Starts data for June.