EUR/USD: Temporary break before the next drop?

Vasilis Tsaprounis Independent Analyst

Some small signs of reaction for the single European currency just above the level 1,04 after yesterday's fall.

Yesterday was marked by a further drop of 100 basis points as those who expected President Lagarde to give some messages of optimism during the conference in Portugal were disappointed.

As we noted on Tuesday, it would be difficult for the ECB President to say something that would be able to create a strong upward momentum for the euro.

So the gap created between FED and ECB policy remains and temporarily favors the US currency.

Yields on 10-year US government bonds remain satisfactory to attract buyers . While the new pressures on the stock markets increase the climate of risk aversion and strengthen the dollar as a safe haven currency.

Now the chances of the pair re-approaching the lows at 1,0350 are increasing, this time the probability that the level will broke downwards is increased.

But on the other hand let us not forget that the levels are already quite low and prices close to the level of 1/1 or below will not be at all desirable by the Eurozone officials.

In such environment we would prefer '' buy on new dips '' strategies for the pair.

Author

Vasilis Tsaprounis

Independent Analyst

Vassilis Tsaprounis possesses over 25 years of professional experience in Capital Markets and especially in the foreign exchange market.

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