How long will EUR/USD parity last?

Mark O'Donnellon 25/08/2022|
2 min read

After the EURUSD reached and broke below parity, an analysis of the situation is in order. 

Last week, the euro failed to close above 1.0320 and the 50-Day Moving Average, presenting a potential bull trap and setting up the opportunity for short sellers, as illustrated by the orange circle. 

EUR/USD 1D, with 50-100-200 Day Moving Average Indicator 

Although the pair broke below the parity on August 22, a decent pullback is on the table, as investors  become uncomfortable with the unusual valuation of the pair. One only has to look back to July 14, to  witness the pullback in the EUR/USD after an intraday probing of the parity level. 

Bears should remember that we might still be in the middle of a downward leg. So, the medium-term  decline may extend to new depths. 0.9900 has already been tested and rejected but a more granular  look at the candles might be necessary at this point. 

The intraday battle  

The EUR/USD spent most of its time consolidating below parity, organizing near 0.9930, before the  London opening and strong European data was released. 

Below, on the hourly chart, you can see the first of the two big blue candles forming after consumer  confidence in the Euro Area rose by 2.1 points in August, from a record low of -27 in July. Consumer  confidence was expected to slide further into negative territory, so the upwards revision came as a  surprise to the markets. 

Two subsequent hourly candle wicks broke above parity to test the staying power of a below-parity  EUR/USD. For now, Support is building below 0.9960. In the short term, the market might need to work  to take out buyers at 0.9900.

EUR/USD 1H, with 50-100-200 Day Moving Average Indicator