EUR/USD: Euro touched 1.0500 level in a strong reaction mode, but further gains are doubtful

The single European currency is trading below the 1,05 level it touched earlier in the early hours of Monday as the reaction after the sharp drop on Friday shows signs of fatigue.

In an environment of intense doubt with many issues remaining on the table and weighing on the European currency, it came under intense pressure on Friday, falling well below the critical level of 1.04, marking the lowest prices in almost two years.

The data announced for the services and manufacturing sectors in the eurozone disappointed, maintaining concerns about the course of the European economy.

This development has increased bets for one more interest rates cut by the European Central Bank by at least 25 basis points, while the possibility of a 50-point cut is also on the table, something that was not on the agenta a few weeks earlier.

On the contrary, the corresponding data for US economy announced on Friday maintained the optimism about the course of the American economy, thus maintaining the gap in the outlook between the two main economies.

Beyond the very good reaction of the European currency, the overall market picture does not show significant differences with critical reasons that burden the European currency remaining high on the agenda.

Despite the temporary small correction, the prices of US government debt securities remain at high levels.

Geopolitical risks, which remain extremely high, and concerns about the course of the European economy, which intensified after Friday's data, complement the negative environment, weighing on the European currency.

Today's agenda is considerably poorer, with the IFO  index for the climate and prospects of the German economy being the only thing that stands out.

The market's behavior with the sharp drop to the levels of 1.04 and even lower confirmed my thinking and my strategy for positions in favor of the European currency at the levels of 1.04 with the aim of a good reaction.

However, as the challenges that burden the European currency remain on the table, I prefer to lock in some small profits and remain on the wait-and-see stance again.

In any case, I will maintain the idea of ​​buying the European currency on new dips as the US currency's gains in recent weeks have been quite significant and signs of fatigue from the recent rally are already on the table.