EUR/USD bears home in on parity, 1.0000, in the countdown to US CPI

• EUR/USD moves closer to the parity level as bears commit. 
• The US CPI will be a key catalyst this week that might either put 1.0100 back on the map or potentially result in a break of parity. 

EUR/USD has come to its closest to parity in 20 years. At the turn of the roll-over and start of the Tuesday early Asian session, the pair had made a low for the week so far of 1.0037. Crucially, this is below the 1.0050 level and bears are going to be hunting down tepid pullbacks in a draw on liquidity for a move to challenge the bull's commitments below parity.  

The US dollar has risen on safe-haven demand and the euro is under pressure due to concerns that an energy crisis will force the eurozone into a recession. Reuters reported that the biggest single pipeline carrying Russian gas to Germany, the Nord Stream 1 pipeline, began annual maintenance on Monday, with flows expected to stop for 10 days. ''Governments, markets and companies are worried the shutdown might be extended because of the war in Ukraine.''

Stocks were also under pressure as markets move out of risk ahead of the highly anticipated inflation reading from the US this week and the start of a key earnings season fuelling a bid in the greenback as for fears of a recession. ''Core prices likely stayed strong in June, with the series registering a 0.5% MoM gain,'' analysts at TD Securities said. ''Our MoM forecasts imply 8.9%/5.7% yoy for total/core prices.''

Meanwhile, net EUR speculators’ net short positions increased again last week as the market turned its attention to recession risks for the Eurozone, as analysts at Rabobank pointed out. ''This is linked to potential gas shortages during the winter and fears that industry may suffer rationing. This scenario is likely to focus the market on fragmentation risks.''

EUR/USD technical analysis

The pair is in a bearish channel and below 1.0050. This puts the emphasis on the downside. However, the M-formation is a bullish reversion pattern and a confluence with the bear-channel resistance, the 38.2% Fibonacci retracement level and the 50% mean reversion area is compelling above 1.0050.

If the bulls commit, there will be the case for a period of either accumulation that could result in a move back to 1.0100 and above, or, so long as the bears commit below this area of confluence, then a break of parity will be back on the cards for the days ahead.