EUR/USD: Euro remains steady above 1.1700 on Fed's week

The single European currency is trading just above 1,17  level at the start of the new week with investors continuing to avoid big bets as the landscape remains cloudy and the catalyst that will create some strong direction has not yet appeared on the table.

The exchange rate continues to remain trapped in a narrow trading range between levels 1,15 and 1,17 with small extensions on either side for 6th consecutive week.

Although several bets that were on the table spoke of a continuation of the upward momentum of the European currency that had begun a few months earlier, the challenges of the European economy and the emerging political unrest in France have acted as a significant drag on the euro.

The recent downgrade of the French government's debt securities is certainly a point of concern, but we may still be a long way from a widespread problem for European debt in general.

With inflation currently under control and close to the European Central Bank's target levels and energy prices at satisfactory levels, the biggest question mark  is the anaemic economy of the eurozone and how it will develop higher rates of growth.

So a crucial question remains whether further much higher prices of the European currency could be tolerated and not create fundamental problems in the European economy with fragile growth being called into question.

On the other side of the Atlantic, all attention is expected to be focused on the Fed meeting on Wednesday, where a rate cut is the most likely outcome.

The yields on US government debt securities have been limited following the latest announcements on the course of inflation, but the US currency continues to offer clearly better interest rates.

At the moment, bets are on further reductions in key interest rates beyond the one on Wednesday, but the more likely scenario is that once the cycle of reductions ends, the US currency will continue to offer higher interest rates than euro.

Today's agenda is quite poor, with the only highlight being the speech by ECB President Christine Lagarde.

No change in my thoughts, I prefer to remain in a wait-and-see attitude, as has been proven and by the narrow range of variation the landscape remains extremely cloudy.

My idea of trying to buy the US currency at some sharp new peak before 1,20 level remains a possible scenario.