EUR/USD could reach parity amid an energy war – MUFG

EUR/USD is trading at new lows below 1.0620 today after falling notably on the news that Russia has cut gas supplies to Poland. Energy risks are set to hurt EUR further, economists at MUFG Bank report.

Next downside target is early 2017 low of 1.0341

“A wider cut off of supply could see gas prices double from yesterday’s close to around EUR 200 MWh. A wider cut-off would have a significant negative impact on sentiment and would have further negative consequences for the euro.”

“Yesterday’s price action in EUR/USD saw a breach of the covid pandemic low of 1.0636 with the next downside target the early 2017 low of 1.0341. 

“Talk of EUR/USD reaching and possibly breaching parity even just a few weeks ago seemed a tall order but the declines now on this potentially damaging development means such a scenario is no longer such a tall order.”