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Morgan Stanley analysts have warned that ongoing energy market volatility could push the EUR/USD pair toward critical support at 1.13, driven by the Eurozone's vulnerability to energy price shocks. The firm highlights that Europe's reliance on energy imports, particularly from Russia, has created a structural weakness in the euro. With energy prices remaining elevated and geopolitical tensions persisting, the EUR/USD is at risk of breaking below key technical levels, potentially triggering broader market instability. This development is significant for forex traders as the EUR/USD is one of the most liquid currency pairs globally. A breakdown below 1.13 could accelerate risk-off sentiment, prompting capital flows into safe-haven assets like the US dollar. Traders should monitor energy price movements, ECB policy responses, and US inflation data for directional clues. The pair's volatility also impacts cross-currency trades and hedging strategies for multinational corporations. For Gulf investors, the euro's weakness against the dollar could affect trade balances and foreign exchange reserves. Energy-dependent economies in the region may benefit from lower import costs if the euro continues to depreciate. Key watchpoints include the EU's energy crisis management, OPEC+ output decisions, and potential ECB rate cuts. A sustained move below 1.13 would likely test 1.10 as the next major support level.
