The single European currency remains under pressure at Wednesday falling below 1.07 levels for a second time in 2 days.

Behavior of the exchange rate during yesterday confirmed once again my thinking as expressed in yesterday's article. Although the European currency came under mild pressure and made new local lows at the 1,0670 level relatively soon it reacted by returning relatively easily well above over 1.07 again.

However, as I have noted in a previous reports, for the moment the European currency is only managing to limit losses in a mild bearish environment, the reactions are of a limited range and it does not seem capable of returning to a strong upward trend.

On the other hand, the hawkish rhetoric of the European Central Bank continued yesterday with similar statements by European officials, something which is currently the main obstacle to the European currency suffering strong losses.

At the same time, the disappointing news on the course of the Chinese economy earlier today increased the level of concern in the markets, reducing the appetite for risk taking, with the result that the US currency found itself benefited as it traditionally functions as a safe haven currency.

Today's agenda is quite rich with important macroeconomic announcements mainly for the European economy, culminating in the course of inflation in the German economy, which is capable of further supporting or reducing respectively the Ecb's aggressive rhetoric. 

Signs of easing inflationary pressures are now strong as low natural gas prices and stabilization in oil prices have acted as catalysts.

I will keep the same strategy in mind as mentioned yesterday which so far has not let me down.

Having now twice tested the levels 1,0670 the probability of seeing new local lows is increased.

In any case I will repeat yesterday's thinking avoiding staying in favor of the US currency at these levels and correspondingly I would feel better to test buys in favor of the Euro at new local lows near the 1.0620-40 levels.

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