EUR/USD: Trade calm before the storm?

Vasilis Tsaprounis Independent Analyst

The European currency is trading in a soft environment near the 1,0350 levels in the early hours of Wednesday ahead of a very rich agenda.

The path of inflationary pressures and growth indicators in several major European economies as well as corresponding news from US are expected to give increased volatility today.

Yesterday's announcement on the course of inflation in the German economy confirmed our assessment that the pressures will show a slight decrease, something that did not favor the European currency, consequently to received slight pressures.

As we pointed out in yesterday's article, Tuesday was indeed characterized by an increased volatility with the pair moving in both directions many times but without breaking any critical levels as it remained between the 1,03-1,04 levels.

This development was quite expected in view of today's day which is characterized by stormy news which obviously limited investors to take large positions.

The market continues to show particular sensitivity to any news on inflationary pressures in Europe and the United States as it is the main macroeconomic data that Central Banks rely on to make their decisions recently.

The harmonized index of consumer prices for the eurozone due to be announced at 12:00 GMT is being awaited with particular interest by investors and any significant de-escalation is likely to create strong pressures on the European currency as will lead the European central bank to reduce its aggressive rhetoric.

For the second day in a row we would give an increased probability to the prospect that the announcement will show a restraint in the inflation that has particularly troubls the eurozone in recent months based again on the same reasoning as yesterday , that the reduced oil prices and the decompression on the high natural gas prices will play a decisive role in limiting inflathions pressures.

In any case, however, such a rich agenda is capable of pushing the exchange rate in any direction, and for this reason, maintaining a waiting attitude may be the most recommended strategy.

I will wait for new dips in the pair to take a positions in favor of the European currency, something that has not disappointed me the last months.

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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