EUR/USD: Central banks talks, the pair walks

The single European currency is on hold above the 1,04 level in the early hours of Wednesday morning, trying to limit yesterday's losses, having moved away from Monday's highs where it climbed just above the 1,0530  level.

Ahead of 2 stormy days where we have the meetings of the two main Central Banks, the Fed and  ECB, investors remain cautious and we will probably not see any big bets on the table until tonight.

No surprises are expected for today's decision, with the base scenario expecting key interest rates to remain at current levels, and it is one of the few times when any other scenario will be a huge surprise.

So investors' attention is expected to focus on Chairman Powell's comments in the wake of the decision, expecting possible clearer messages about Fed's future intentions.

In any case, the interest rate gap will continue to be in favor of the American currency, which at present, along with some other critical catalysts, remains one of the obstacles in the European currency's effort to continue the reaction and re-approach 1.08 -1.10 levels.

In the overall market picture, there are no significant differences and there would have to be some significant surprise to see the pattern of the last few days change dramatically.

Geopolitical risks show 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 as there are small chances for surprise. 

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.

Today's agenda is dominated by the Fed meeting and Chairman Powell's comments, with nothing else important, with the result that no significant fluctuations in the exchange rate are expected until the evening.

Without any big surprises the latest pattern of the last weeks most propably will remain as the base scenario, for the European currency perhaps its not yet time to move to significantly higher levels and on the other hand as the exchange rate approaches the critical level of 1/1 the euro may continue to react successfully.

So, the idea of buying Euro on dips remains my main thought.