What is more important for the euro—ECB rates or gas prices? This question might have seemed ridiculous at any other time, but not today. On July 21, a meeting of the European Central Bank will take place, at which it will increase the rate on deposits for the first time in many years. On the same day, the maintenance period for the Nord Stream 1 pipeline will end. If it remains closed, the recession of the European economy will force Christine Lagarde and her colleagues to reconsider their plans and result in a further fall in EURUSD. According to Societe Generale, at least 10%.

The war in Ukraine has let Russia supply 40% less gas to the eurozone than at the beginning of 2022. Blue fuel provides about a fifth of its budget revenues, and oil accounts for half. Moscow can afford to reduce exports, especially since revenue is unlikely to decrease significantly: prices for Dutch gas have skyrocketed. They currently act as the main driver of the euro exchange rate formation.

EURUSD dynamics and Dutch gas price

Expectations of the start of the monetary policy tightening cycle are not helping the euro at all. The ECB is moving more slowly than other central banks. The futures market expects it to raise the deposit rate by 125 bps by the end of 2022. The Fed has already done more. And it is going to bring the federal funds rate to 3.5%.

Of course, the collapse of the EURUSD cannot please the officials of the Governing Council. Bank of France Governor Francois Villeroy de Galhau said that the ECB is closely following the developments in Forex and named the strong US dollar, not the weak euro, as the main reason for the fall in the quotes of the main currency pair. Indeed, the trade-weighted exchange rate of the regional currency against a basket of 42 currencies of the eurozone's main trading partners has fallen by a modest 1.6% since the beginning of the year. During the same period, EURUSD sank by as much as 12%.

The pair approached parity and even flirted with it. However, before the US inflation report, neither the bulls nor the bears are in a hurry to climb ahead. Bloomberg experts expect further acceleration of consumer prices by 8.8% YoY and 1.1% MoM, which should potentially play into the hands of the US dollar. Nevertheless, core inflation could slow down from 6% to 5.7%, which may inspire EURUSD buyers to counterattack.

Moreover, according to Deutsche Bank forecasts, the S&P 500 is unlikely to sink amid negative corporate earnings. It has already been taken into account in quotes, and historically, in 75% of cases, the stock index grew after sales in the reporting season.

Technically, a 1-2-3 reversal pattern can form on a 4-hour chart. It makes it possible to buy EURUSD on a resistance breakout at 1.0075. There is also a pivot point. Moreover, the growth of the euro may stop at the lower limit of the fair value of 1.012–1.054. A rebound with a close below it is a reason to sell.