EUR/USD: The euro on defense mode, but for how long?
|Once again the pair confirmed the expectations and after a daily drop below 1,04 on Thursday it reacted strongly with gains of around 100 basis points approaching 1,05 again.
It seems that " buy on dips " strategies, turned out to be one of the most appropriate as we noted in yesterday's report.
The key macroeconomic picture is unchanged. The US core Personal Consumption Expenditure (PCE) Price Index came in as expected, falling slightly to 4.7 from 4.9 in the previous month, with no surprises. But it is a small indication that the latest interest rate hikes by Fed may have the first positive impact in terms of containing inflation.
Markets now seem to have '' digested '' that the Fed-ECB gap will remain as the ECB appears to be reacting very cosernative to the prospect of a rate hike, even as euro zone inflation stabilizes above 8%.
The pair is looking to find direction and through the technical picture of the charts, but from which we have mixed conclusions.
For this reason and in view of the absence of important events throughout the day we will prefer to maintain neutral view by repeating yesterday's idea for '' buying in dips " strategies for the Euro.
The view that the critical 1,0350-70 support level is now likely to be broken remains.
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