Will this crisis lead to the collapse of the EU?
The Russian invasion of Ukraine had a prominent victim, which was not Ukraine; it was the European Union! Europe and America used the sanctions to confront and put pressure on Russia, and Russia used its powerful weapon, which is energy export, to counter.
Gas stoppage intensifying the European energy concern. This new week started with another pressure on the EU, with Gazprom stopping delivering natural gas to Europe for three days at the end of August. On Monday, Dutch front-month gas contract, known as the European benchmark, raised 11%, up to 270.98 euros a megawatt-hour, to print a new record after just Friday's all-time high. Even without considering this news, Nord Stream1 works with only 20% of its capacity after shutting down for maintenance work last month. While most European countries, including Germany, are struggling to fill storage sites ahead of winter, they are considering reactivating coal-fired power plants.
For the second time in less than a month, the Euro tested under 1 US dollar, and both times were seen after energy warnings. As a reaction, Euro fell under 1 USD to Start its Decline, as many Strategists Say. Even though we should not ignore the USD's strength, Euro weakness would be more reasonable for such a significant fall. That is why many strategists see lower levels as just the start of a deeper descent.
We must wait for the Jackson Hole symposium to see the central banks' reaction to the current situation. For now, none of the fundamental or technical indicators can support the bulls, so there is a downtrend with the following support around 0.97 USD, a level not seen since the early 2000s.
This sharp decline of the Euro and imbalances between the EU member economies can increase the bond Yields spread in the Eurozone and the subsequent differences between European countries that can lead to the collapse of even the European Union.
