The euro against the dollar is about to fall below parity, where is the euro this time?

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The price of EUR/USD is approaching parity (1.0000), and the possibility of falling below is not low. Once parity is lost, beware of panic selling

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On Monday, the US index stood at the 108 mark, continuing to hit a new high since October 2002. The parity between the euro and the US dollar is imminent, and the narrowest difference is only 30 points. Given that EUR/USD was still trading around 1.15 in February, the pair's downtrend was swift and brutal. A string of increasingly larger rate hikes by the Federal Reserve has boosted the dollar, while problems with Russia and Ukraine have worsened the euro zone's growth prospects and pushed up the cost of its energy imports.

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The so-called wall is pushed by everyone, including Goldman Sachs, Citigroup, Deutsche Bank and other big banks believe that EUR/USD will fall below parity, and the above-mentioned institutions believe that the target range for the next stage is 0.9700~0.9500.

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Shorting the euro was one of the most popular trades among forex professionals last week. Compared with other major currencies, euro positions saw the biggest weekly change, with net short account positions increasing by $769 million to a total of $2.2 billion, Scotiabank strategists Shaun Osborne and Juan Manuel Herrera Betancourt wrote in a Monday report. The highest level since the end of November last year.

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The Russian-Ukrainian conflict has continued to deteriorate Europe's energy supply prospects, causing the already fragile euro zone economy to face incalculable losses. Fears of a recession in Europe have been increasing day by day, coupled with the aggressive monetary tightening policy of the Federal Reserve, which has kept the EUR/USD under pressure, and it is not surprising that it fell below parity. Nord Stream 1, Russia's largest single pipeline to send natural gas to Germany, began annual maintenance on Monday, with gas supplies expected to stop for 10 days, but markets fear the shutdown could be extended due to the Russian-Ukrainian conflict and could disrupt the winter fill Inventory plan. Investors worry that Europe could slip into recession if Russia fails to restore gas supplies after completing pipeline maintenance.

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The Eurogroup said on the 11th that due to adverse factors such as high energy prices and deteriorating global terms of trade, the 19 member states of the euro area are now facing further inflationary pressures. At the same time, the economic growth prospects of the euro area have been weakened. As European Central Bank President Lagarde said before - the conflict between Russia and Ukraine has seriously affected people's confidence. And Europe has suffered significantly more than other regions in this conflict. For example, European energy prices have soared and food supplies have been strained. In other words, the market's confidence in Europe is undoubtedly more hit.

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Whether it is the prospect of the central bank's interest rate spread or the follow-up impact of the Russian-Ukrainian conflict, the medium and long-term prospects for the EUR/USD are difficult to be optimistic.

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Citigroup analyst Tom Fitzpatrick said in a note to clients that he recommends shorting the euro against the dollar "full force". Fitzpatrick decided to shift its focus from EUR/JPY to outright shorting EUR/USD, recommending selling EUR/JPY puts at a small loss and buying three-month EUR/USD puts instead. Last week, Citi was short EUR/USD at 1.0141 with a target of 0.9700 and a stop loss of 1.0225. Interest rates in the U.S. fixed-income bear market peaked last month, similar to January 2000, when the euro also fell below parity against the dollar, according to Fitzpatrick.

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Coincidentally, the last time EUR/USD fell below parity was another war - the bombing of Yugoslavia by NATO. Coincidentally, the Fed also entered an aggressive rate hike mode that year!

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Last time, EUR/USD fell as low as 0.8231, so what about this time?