EUR/USD: Εuro tries to approach 1.0600 level as recent Dollar rally shows signs of fatigue

The single European currency after a 5-day losing streak is trying to react having already moved away from the 1.05 level limiting its weekly losses for now.

US Treasury yields remain at high levels but showing signs of stabilization having retreated slightly from recent highs. 

10-y Treasury notes is just below the recent high of 4.48 level something that supported the US currency.

My assessment that we will soon see some decompression in yields remains, with a return to near 4.00 levels being a likely scenario.

Possible further decompression in yields levels is likely to further strengthen the effort of the European currency to react.

In general the market picture remains the same with the dust from the Presidential elections in US and the political instability in germany not yet settled.

Small changes in bets on interest rates outlook as some chance for 25 basis points cut from Fed in December remains on the table while the landscape is relatively cloudier from the European Central Bank side.

On today's agenda, Retail Sales in the United States stand out, something that investors are eagerly waiting for, as it is known that consumption remains the main pillar of the American economy.

Apart from some good corrections the European currency most probably will struggle to change the momentum and will need some  surprises and negative events in the United States for this to happen.

On the other hand the US dollar has already moved up nearly 700 basis points from the recent 1.12 level and I would not feel comfortable betting  in favor of the US currency at these levels.

The recent limited reaction of the European currency has confirmed my thoughts of yesterday which broadly remain the same.

I continue to maintain a conservative approach and although  that the signs of a reaction of the European currency is already on the table I prefer to remain on hold.