EUR/USD: Ηigh volatility most likely for today
|The single European currency remains below the 1,04 level in early trading time on Tuesday having recovered slightly from yesterday's pressures in a day of extreme volatility.
As we reported yesterday It would be a surprise if the European currency managed to break But also stay above its previous highs of 1,0480.
Although there was a temporary break of the level which was apparently due to the short execution of stop loss orders that were above the 1,0480 level then the pair came under intense pressure correcting around 160 basis points and returning to the 1,0340 levels.
Awaiting today's announcement for the level of inflation in the German economy and then tomorrow's announcement for the eurozone inflation are now the catalysts that will determine whether the exchange rate will move much lower if inflation shows signs of decompression, or if the pair will recover very quickly again to the levels of 1,05 in the case that the numbers will show high inflathion presures and in particular if quite higher than expected.
In her speech yesterday, ECB's President Christine Lagarde reminded the markets that the main tool to limit the level of inflation in the Eurozone is interest rate increases.
Monday's intense volatility it is characteristic of the fact that the exchange rate is currently struggling to find a direction and although it is quite prone to corrections the European currency maintains its basic behavior and reacts quite strongly to the dips of the pair.
The recent decline in oil prices and the temporary decline in natural gas prices which in the last month have shown some behavior to move to lower levels increase the chances that inflationary pressures will show some easing which will limit the Ecb's aggressive rhetoric with consequence the European currency to move lower.
I would give slightly increased odds that the German economy inflation announcement later in the day will show that inflation pressures are easing and the European currency will move even lower.
In any case, I will maintain a waiting attitude until the announcement.
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