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EUR/USD: Εuro on a defensive mode, tries to stay close to 1.0900 level

The single European currency slipped below the 1.09 level in early morning trading on Tuesday in a narrow range as the euro's bullish momentum of recent days showed signs of fatigue.

The recent political developments in the United States with the assassination attempt against the Presidential candidate Donald Trump does not seem to have much impact on the exchange rate which remains attached to the prospects of a cut in key interest rates by Fed and ECB.

After the further easing of inflationary pressures in US  which surprised last week, bets on a rate cut have increased dramatically for the possibility of September while the Fed's rhetoric of a single hike until the end of the year is now under doubt.

The containment of consumer inflation has so far acted as a trigger and the exchange rate has broken free from the narrow 1.07 - 1.08 range it had been trapped in for some time, but the latest upside may still be too early to consider as  a change in trend.

As the interest rate differential remains clearly in favor of the US dollar, with the prospect of this gap widening further, I continue to have doubts about the European currency's ability to maintain long-term bullish momentum, breaking relatively easily but mostly maintaining levels above the 1.10.

On the other hand, the significant compression in which the exchange rate has been in the last period has increased the chances of execution of large stop loss orders which are likely to be above 1.10 as well as below a 1.06 which could temporarily lead the pair to a sharp peak well above 1.10 which could potentially create buying opportunities for the US currency.

Α possible such a scenario I expect for the prospect of positioning myself in favor of the US currency.

Today's agenda is quite interesting with the ZEW Institute survey of Eurozone Economic sentiment and US Retail Sales standing out.

Both have the weight to affect the exchange rate if there is any significant surprise.

I remain on hold recalling my thought as mentioned earlier on the possibility of buying the US currency on a strong peak above the 1.10 level.

Author

Vasilis Tsaprounis

Vasilis Tsaprounis

Independent Analyst

Vassilis Tsaprounis possesses over 25 years of professional experience in Capital Markets and especially in the foreign exchange market.

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