EUR/USD: Remains heavy between 1.1600 and 1.1700 despite the geopolitical storms

The single European currency is trading near  1.1650 level in a narrow trading range in the early hours of Wednesday as investor confusion has been the main feature of recent days,  avoiding taking large bets.

The US currency has so far been favored during the first days of the new year as the geopolitical storm that began with the US intervention in Venezuela and the general very aggressive rhetoric by President Donald Trump has raised the level of concern to a very high level with the US currency receiving some benefits, although very limited.

In parallel with geopolitical developments, the issue of key interest rates from  Fed and the European Central Bank remains high on investors' agenda and is so far the main driver for the course of the exchange rate.

Although yesterday's announcement of the path of consumer inflation in the United States was slightly lower than expected, it did not surprise so strongly as to significantly change bets on  Fed's future intentions.

Analysts who had been betting on a continued very aggressive rate cut by  Fed so far seem to be failing as the landscape remains cloudy and the possibility of more than one cut in the near future is now quite limited.

As a result, the exchange rate has lost its strong upward momentum for 7 months and is in a consolidation environment in a range of 300 to 400 points, and prices well above 1.20 remain a significant challenge.

Quite interesting today's agenda with retail sales in the United States and several statements by Fed officials stand out.

I remain quite cautious about the course of the exchange rate and it is difficult at the moment to see any specific direction.

I prefer to remain in a wait-and-see position, but I keep in mind the idea of buying the US currency at some new peak, probably a little lower than the critical level of 1,20.