Vasilis Tsaprounis
Independent Analyst
The single European currency seems to be trying to consolidate at the level of 1,07 and so far it is moving mildly upwards as the expectations of the Fed meeting which starts today have been considerably lowered after the latest developments of the financial crisis that worries the United States.
The bets a few weeks ago were clearly in favor of a 50 basis point hike, but now the odds are stacked against a 25 basis point decision as the ill effect of high interest rates on a set of mid-sized banks in the United States appears to be constraining Fed's officials from moving more aggressively.
At the same time the climate of calm which has returned to the international stock markets limits the need to buy the US dollar which traditionally functions as a safe haven currency.
As i mentioned in yesterday's article the general picture of the market does not have big differences, at the moment the pair has escaped from the level 1,05-1,07 , which happened again a few days ago and will need stabilization well above this level , without returns , in order to have a clear vesting message.
The big upheaval brought by the SV and Credit Suisse banks case to the markets , having now changed the reaction margins of the Fed , have led the European currency to be in the spotlight again with better chances than earlier and now the Euro's buy positions in every dip proves to be the better thinking.
In any case, pending the Fed's meeting and with the possibility of a surprise always in play, I do not expect the upward momentum of the European currency to be very intense and long-lasting, and very soon may some signs of fatigue will appear , especially if it tries to approach the level of 1,08.
From today's agenda stands out the announcement of the Zew survey on the economic situation and sentiment in the eurozone , as well as for the second consecutive day President Lagarde speech , while from the United States' side the only interest is focused on existing home sales.
I see no significant reason to change my basic strategy of buying on dips and thinking about selling at some new peaks.
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