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The euro has taken a nasty tumble today. In the North American session, EUR/USD is trading at 1.0144, down 0.76%.

Nord Stream 1 cut to 20% capacity

The energy crisis surrounding Nord Stream 1, a key channel for Russian gas exports to Europe continues to simmer. Perhaps the pipeline should be referred to as ‘Nord Brook 1’, after Gazprom, the Russian energy giant, warned it will cut flows through the pipeline to just 20% of capacity starting Wednesday, claiming “technical issues”. The EU has charged that the move is politically motivated, but Vladimir Putin is holding the better hand of cards and has no compunction about weaponising energy exports to the West.

The EU has scrambled to scale back its energy dependence on Moscow and announced today that member states had agreed on a voluntary reduction of 15% in natural gas imports. The deal was reached at lightning speed, reflecting the tremendous apprehension in Brussels about an energy crisis this winter. Still, the agreement has apparently been watered down, with exemptions for members that are not directly linked to EU gas pipelines and are completely dependent on Russia. The latest squeeze on Nord Stream 1 has unnerved investors and sent the euro sharply lower.

With the war in Ukraine dragging on and a potential energy crisis looming, it’s no surprise that German confidence indicators are under pressure. Ifo Business Sentiment slipped to 88.6 in June, down from 92.2 in May. The soft reading was accompanied by a warning from the Ifo Institute, which warned of a looming recession in Germany, due to soaring energy prices and the possibility of a gas shortage in Europe’s largest economy. On Wednesday, Germany releases GfK Consumer Climate, which is expected to fall to -28.9 in August, down from -27.4 in July. The index has been steadily weakening and has been mired in negative territory since October 2021.

All eyes will be on the Federal Reserve on Wednesday, with a live meeting that will include a supersize rate hike. The markets are expecting a 75bp increase for a second straight meeting, but a massive 100bp hike cannot be ruled out. A 75bp move could be met with a yawn by the US dollar, while a 100bp increase would be a surprise and likely boost the greenback.

EUR/USD Technical

• EUR/USD continues to test support at 1.0191.  The next support level is 1.0105
• There is resistance at 1.0304 and 1.0390

Daily Pivots: (S1) 1.0180; (P) 1.0219; (R1) 1.0259; More...

Intraday bias in EUR/USD remains neutral first. on the downside, break of 1.0118 will suggest that rebound from 0.9951 has completed. Bias will be back on the downside for retesting 0.9951 low. On the upside, above 1.0277 will resume the rebound to 1.0348 support turned resistance.

In the bigger picture, down trend from 1.6039 (2008 high) is still in progress. Next target is 100% projection of 1.3993 to 1.0339 from 1.2348 at 0.8694. In any case, outlook will stay bearish as long as 1.0773 resistance holds, in case of strong rebound.

Daily Pivots: (S1) 1.1976; (P) 1.2032; (R1) 1.2102; More...

Intraday bias in GBP/USD is turned neutral with current retreat. Further rise is mildly in favor with 1.1888 minor support intact. Above 1.2089 will target 55 day EMA (now at 1.2243). Sustained trading above there will pave the way to 1.2405 resistance and above. On the downside, below 1.1888 minor support will bring retest of 1.1759 low instead.

In the bigger picture, fall from 1.4248 (2018 high) could be a leg inside the pattern from 1.1409 (2020 low), or resuming the longer term down trend. Deeper decline is expected as long as 1.2666 resistance holds. Next target is 1.1409 low. However, firm break of 1.2666 will bring stronger rise back to 55 week EMA (now at 1.2986).

Daily Pivots: (S1) 0.9619; (P) 0.9640; (R1) 0.9667; More...

Further decline is in favor in USD/CHF with 0.9738 minor resistance intact. Fall from 0.9884 is seen as a falling leg of the consolidation from 1.0063. Deeper decline would be seen to 0.9493 support. On the upside, though, above 0.9738 minor resistance will turn bias back to the upside for 0.9884 resistance.

In the bigger picture, medium term up trend from 0.8756 (2021 low) is still in progress. On resumption, next target is 1.0342 (2016 high). Sustained break there will resume long term up trend from 0.7065 (2011 low). This will remain the favored case as long as 0.9471 resistance turned support holds.

Daily Pivots: (S1) 136.10; (P) 136.45; (R1) 137.00; More...

Intraday bias in USD/JPY remains neutral and outlook is unchanged. On the downside, firm break of 134.73 will confirm short term topping, on bearish divergence condition in 4 hour and daily MACD. Deeper fall would be seen through 55 day EMA to 126.35/131.34 support zone. On the upside, break of 139.37 will resume larger up trend.

In the bigger picture, current rally is seen as part of the long term up trend from 75.56 (2011 low). Next target is 100% projection of 75.56 (2011 low) to 125.85 (2015 high) from 98.97 at 149.26, which is close to 147.68 (1998 high). This will remain the favored case as long as 126.35 support holds.

Daily Pivots: (S1) 0.8464; (P) 0.8495; (R1) 0.8514; More...

EUR/GBP's break of 0.8456 minor support suggests that rebound from 0.8401 has completed at 0.8585. Intraday bias is back on the downside for 0.8401 support first. Break there will resume larger decline from 0.8720. Deeper fall would then be seen towards 0.8201 low. On the upside, above 0.8490 minor resistance will turn intraday bias neutral first.

In the bigger picture, attention remains on 38.2% retracement of 0.9499 to 0.8201 at 0.8697. Sustained break there will affirm the case that rise from 0.8201 is a medium term up trend itself. Further rally would then be seen to 61.8% retracement at 0.9003. However, rejection by 0.8697 will confirm medium term bearishness for another fall through 0.8201.

Daily Pivots: (S1) 1.4646; (P) 1.4724; (R1) 1.4772; More...

EUR/AUD's decline continues today and hits as low as 1.4598. Intraday bias stays on the downside for retesting 1.4318 low. Decisive break there will resume larger down trend. On the upside, above 1.4803 minor resistance will turn intraday bias neutral, and bring consolidations first, before staging another decline.

In the bigger picture, rejection by 1.5354 support turned resistance, as well as 55 week EMA (now at 1.5378), maintain medium term bearishness. That is, larger down trend from 1.9799 is not completed yet. Break of 1.4318 low will target 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623, which is close to 1.3624 long term support (2017 low). This will remain the favored case now as long as 1.5396 resistance holds.

Daily Pivots: (S1) 138.92; (P) 139.49; (R1) 140.27; More....

EUR/JPY's fall resumes after brief recovery and intraday bias stays on the downside. Fall from 142.31 is seen as a falling leg inside the corrective pattern from 144.23. Deeper decline would be seen to 136.85 support. On the upside, above 140.06 minor resistance will turn bias back to the upside for 142.31 resistance instead.

In the bigger picture, up trend from 114.42 (2020 low) is seen as the third leg of the pattern from 109.30 (2016 low). Further rally is in favor as long as 134.11 resistance turned support holds, even in case of deep pull back. Next target is 149.76 (2015 high). However, sustained break of 134.11 will be a sign of medium term bearish reversal and turn focus to 124.37 support for confirmation.

Euro is under heavy selling pressure today on renewed worries over cut off of Russia gas supply. It's additionally pressured and Germany 10-year yield breaks below 1% handle again. For now, Sterling appears to be a distant second. On the other hand, Dollar and Yen are gaining most, followed by Swiss Franc. Commodity currencies are now taking a back seat, with Aussie, Kiwi and Loonie trading mixed.

Technically, EUR/GBP's break of 0.8456 minor support now suggests that rebound form 0.8401 is finished, and fall from 0.8720 is resume to resume. A major focus in on whether EUR/USD will also break through 1.0118 minor support, and reach larger down trend through 0.9951 low. This time, if it happens, it might take a relatively much longer term for EUR/USD to regain parity.

In Europe, at the time of writing, FTSE is up 0.61%. DAX is down -0.54%. CAC is down -0.11%. Germany 10-yaer yield is down -0.0085 at 0.933. Earlier in Asia, Nikkei dropped -0.16%. Hong Kong HSI rose 1.67%. China Shanghai SSE rose 0.83%. Singapore Strait Times rose 0.37%. Japan 10-year JGB yield rose 0.0035 to 0.210.

EUR/CHF downside breakout on gas crunch worries

Euro is knocked down by renewed concerns over Russia gas supply cut to EU countries. That came after Russia said yesterday that it would cut gas flows through the Nord Stream 1 to Germany, to just 20% of normal capacity, down from current 40%.

EUR/CHF finally resumes recent down trend through 0.9804 low. Outlook will now stay bearish as long as 0.9948 resistance holds. Next target is 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650.

Japan government: Economy is picking up moderately

In the latest monthly report, Japan's Cabinet office upgraded its assessment slightly, and noted that "the Japanese economy is picking up moderately." That compared to showing signs of picking up in previous report.

But the report also warned of the downside risks from "fluctuations in the financial and capital markets amid global monetary tightening."

BoJ minutes: Board members spoke of importance of wage increases

In the minutes of June meeting, BoJ board said price rises have been broadening. But massive support is still needed for the economy while uncertainty surrounding the outlook was "extremely high".

"Many members spoke about the importance of wage increases from the perspective of achieving the BoJ's price target in a sustained and stable fashion."

"Japan must create a resilient economy at which consumption continues to rise even when companies raise prices," one board member said.

"The BOJ must maintain monetary easing until wage hikes become a trend, and help Japan achieve the bank's price target sustainably and stably," another member said.

EUR/JPY Mid-Day Outlook

Daily Pivots: (S1) 138.92; (P) 139.49; (R1) 140.27; More....

EUR/JPY's fall resumes after brief recovery and intraday bias stays on the downside. Fall from 142.31 is seen as a falling leg inside the corrective pattern from 144.23. Deeper decline would be seen to 136.85 support. On the upside, above 140.06 minor resistance will turn bias back to the upside for 142.31 resistance instead.

In the bigger picture, up trend from 114.42 (2020 low) is seen as the third leg of the pattern from 109.30 (2016 low). Further rally is in favor as long as 134.11 resistance turned support holds, even in case of deep pull back. Next target is 149.76 (2015 high). However, sustained break of 134.11 will be a sign of medium term bearish reversal and turn focus to 124.37 support for confirmation.

Economic Indicators Update

Euro is knocked down by renewed concerns over Russia gas supply cut to EU countries. That came after Russia said yesterday that it would cut gas flows through the Nord Stream 1 to Germany, to just 20% of normal capacity, down from current 40%.

EUR/CHF finally resumes recent down trend through 0.9804 low. Outlook will now stay bearish as long as 0.9948 resistance holds. Next target is 100% projection of 1.2004 to 1.0505 to 1.1149 at 0.9650.