According to strategists at Westpac, the economic and political costs of eliminating dependency on Russian energy are likely to weigh on EU growth and the euro into the second half of 2022. Thus, EUR/USD could test 2017 lows at 1.0340/50.

Eliminating reliance on Russian energy would reduce EU growth by 3% in 2023

“According to IMF, eliminating reliance on Russian energy would reduce EU growth by 3% in 2023. This growth strain will continue to weigh on EUR.”

“An agreement on reducing oil imports is expected this week, but risks are that an aggressive embargo could cause Russia to restrict gas exports in retaliation and so heighten EU’s energy crisis.”

“Unless EUR can swiftly regain levels above 1.07 it will remain at risk of further sharp declines to retest 1.0340/50 (2017 lows) if not the 1.0200-50 area.”