EUR/USD forecast as Europe braces for its biggest gas crisis

The EUR/USD pair retreated on Friday morning as the outlook for the European economy dimmed as a gas crisis starts. It is trading at 1.1064, which is significantly lower than this week’s high of 1.1185. 

Europe is in a crisis

The Eurozone is in one of its biggest crisis in the past few years as an energy crisis is set to start. This happened after the Russian government announced that it will only accept payments in rubles for its energy. It said that these new rules will apply to countries it believes are unfriendly, such as those in Europe.

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In a meeting this week, European leaders announced that they will only buy Russian gas in euros. As such, there is a risk of a major crisis in the coming days as Europe battles to find fresh supplies of the important commodity.

This week, the German and Austrian governments announced new measures that could lead to gas rationing. Germany imports about 40% of its gas from Russia while Austria imports 80% from the country.

While the US has pledged to boost its gas supplies to Europe, analysts believe that the process will take months. The same is true with other sources of gas like Qatar and Saudi Arabia.

Eurozone inflation

The EUR/USD will react to the latest flash consumer inflation data that will be published by Eurostat. Economists expect these numbers to show that the bloc’s CPI rose from 5.9% in February to 6.65 in March this year. They also expect that the core CPI that excludes food and energy rose to 3.3%.

The bloc’s inflation will keep rising in the coming months especially as the energy crisis escalates. Some analysts believe that the official inflation will rise to more than 10% this year.

The other top data to watch will be the American non-farm payrolls (NFP) data scheduled for Friday. Analysts expect these numbers to reveal that the country’s unemployment rate declined to about 3.7% in March as the labor market tightened.

Further, they see the non-farm payroll (NFP) rose by more than 500k in March while wages rose by more than 5% in the same period.

The EUR/USD has tilted lower and moved to the middle of the purple channel. It has also moved slightly below the 25-day and 50-day moving averages and the 38.2% retracement level. Therefore, the bearish trend will likely prevail.

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