EUR/USD: The risks of the Euro in an environment of uncertainty
|The single European currency has fallen below the 1.04 level, limiting yesterday's gains, where Trump's inauguration was accompanied by temporary great euphoria in the markets, thus strengthening the climate in favor of taking risks, also strengthening the European currency.
Although there was a holiday in the United States due to Martin Luther King Day, the exchange rate performance surprised with the European currency strengthening significantly.
The European currency is in a momentum of intense reaction after the positive behavior of the previous week and this week maintained - at least at its opening - the same momentum.
I would have some doubts about whether this momentum will be able to last long, as the main catalysts that had a fairly negative impact on the European currency over the past three months remain on the table.
Although developments are ongoing, with the ceasefire agreement in the Middle East currently progressing with some relative smoothness, with the first hostage releases to be already a fact and Donald Trump's Presidency on the horizon, the general picture of the market remains the same.
Geopolitical risks show some signs of shrinking, but as long as the Ukrainian front remains open, the possibility of an ''accident'', even if it is smaller, remains on the table.
The interest rate gap is expected to remain in favor of the US currency even if the Fed decides to cut rates by 25 basis points at its next meeting.
While the possibility of political instability in the European Union's two largest economies, Germany and France, along with the sluggish growth of the European economy, remain high on the agenda, worrying investors.
On the other hand, the behavior of the exchange rate in recent days has fully confirmed my thinking and my preference for positioning in favor of the European currency in dips with the aim of some good reaction.
I don't see any significant change in the overall market picture with this pattern having a good chance of remaining as the base scenario , for the European currency perhaps its not yet time to move to significantly higher levels returning closer to levels like 1.08 or 1.10 and on the other hand as the exchange rate approaches the critical level of 1/1 the euro may continue to react successfully.
Today's agenda, while not nonexistent, does not include any announcements that could shake up the markets, with investors likely to remain focused on the first day of Donald Trump's presidency.
The idea of buying Euro on dips remains my main thought.
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