EUR/USD: Euro on consolidation mode with the 1.0900 level under challenge

European single currency trades marginally above 1,09 level as correction after Monday's strong rally remains in play.

Markets have returned to a stabilizing environment capping Monday's losses with the Japanese Yen shedding some of the strong gains helping the dollar index  move sharply higher with the US currency strengthening against  all major currencies.

The Middle East front currently remains the main concern as a possible attack by Iran on Israel could have unforeseen consequences with strong shocks returning to the markets.

Concern over disappointing US macroeconomic data in recent days remains on the table but we may be a long way from the US economy entering recession mode.

However, these developments have changed bets on Fed's rates cut prospects, and now the likelihood of a more aggressive policy with at least two cuts by the end of the year, possibly in a wider range, has increased.

The last breakout of the European currency which took it to the threshold of 1,1000  I think is not the beginning of a strong upward momentum as several weights remain on the table which make it difficult for a strong rise of the European currency at the moment.

However, this does not remove the possibility that a level 1,10 will be challenged again.

Today's agenda is relatively poor without anything important with the consequence that all interest is limited to the developments in Middle East and the further behavior of international stock markets.

Despite the increased volatility of the last few days the overall market's picture does not seem to have significant differences with the largest range of the last months 1,06 - 1,10 remaining on the game with possible some good extesions on either side.

I remain on hold, keeping my thoughts on positioning at the limits or possibly on some extension of this range.