EUR/USD bears strive for parity near 1.0050 ahead of German ZEW data, US inflation

• EUR/USD remains pressured around 20-year low, sidelined of late.
• Impending gas shortage propels fears of recession in the bloc to favor the bears.
• Strong US inflation expectations, risk-aversion wave underpin USD’s safe-haven demand.
• ZEW Survey figures for July can entertain traders but risk catalysts are the key.

EUR/USD bears take a breather around 1.0050, after refreshing the 20-year low with the biggest daily slump in a week. That said, a lack of major catalysts and the market’s cautious mood ahead of the key data/events appear to challenge the pair traders during Tuesday’s Asian session.

With the chatters surrounding Russia’s closure of the Nordstorm 1 gas pipeline for maintenance fueling fears of economic slowdown in Europe, EUR/USD had a major downside to track the previous day. On the other hand, a jump in the US inflation expectations and comments from the US policymakers suggesting more pain ahead escalated the fears of economic slowdown, which in turn propelled the US dollar’s safe-haven demand.

German Economy Minister Robert Habeck said on Monday it was difficult to say whether Nord Stream 1 gas pipeline would come back online after the maintenance, as reported by Reuters. On the same line, a German Newspaper Handelsblatt quoted the Chief of the German trade union DGP as saying, “Millions of jobs could be threatened if Russian gas stop goes on for longer.” However, Vice President of the European Commission Valdis Dombrovskis mentioned, per Reuters, “Complete gas stop this month is a no base scenario.”

That said, one-year US inflation expectations jumped to the record high of 6.8% in June, versus 6.6% prior, per the NY Fed’s survey of one-year-ahead consumer inflation expectations. The inflation expectations followed strong US employment data, published Friday, to underpin hopes of an aggressive Fed rate hike and fuelled concerns over the health of the US economy, as well as the global ones. That said, the latest US jobs report mentioned that the US Nonfarm Payrolls (NFP) rose by 372K for June, versus expected 268K and downward revised 384K prior. Further, the Unemployment Rate matched market expectations of reprinting 3.6% level. Further details suggest that the annual wage inflation, as measured by the Average Hourly Earnings, edged lower to 5.1% from 5.3% in May and the Labor Force Participation declined to 62.2% from 62.3.

Elsewhere, White House Press Secretary Karine Jean-Pierre told reporters that she expects new Consumer Price Index (CPI) data to be highly elevated. Further, Atlanta Fed President Raphael Bostic said that recent inflation data has not been as encouraging as I would have liked, per Reuters.

Amid these plays, equities remained depressed and the US Treasury yields kept flashing recession fears. S&P 500 Futures, however, print mild gains by the press time.

Moving on, ZEW Survey for Economic Sentiment, for Eurozone and Germany, expected -32.8 and -38.0 respectively, appear important for the EUR/USD traders to watch amid fears of economic slowdown in the bloc. However, major attention will be given to fears of higher inflation ahead of the US Consumer Price Index (CPI) for June, up for publication on Wednesday.

Technical analysis

A clear downside break of the early 2017 low of 1.0340 keeps EUR/USD bears directed towards the August 2002 low near 0.9625. However, the 1.0000 psychological magnet may probe the short-term bears.