The single European currency has started the week on a quiet note, recovering slightly from Friday’s losses as the European Central Bank‘s hawkish tone from last Thursday’s meeting remains on the table.
The market’s behavior on Friday confirmed my thoughts expressed in the previous article, as I had significant doubts as to whether the European currency would be able to maintain the strong upward momentum of the previous 2 days.
In fact, the euro lost much of the previous two days’ gains, dropping more than 100 basis points and falling from highs of 1.10 to just below 1.09.
Although the aggressive tone of President Lagarde has not yet faded, I believe that it is not yet time for the exchange rate to dramatically change some levels and moves well above the levels of a 1.10, securing prices without any significant correction.
The question for the European single currency is likely to remain on the table, however, without Friday’s correction if it continues to have the same intensity.
Today’s agenda is extremely light and the only thing that stands out is the announcement from the IFO Institute on the climate and outlook for the German economy and without some major surprise it will be difficult to see big changes in the exchange rate.
The most likely scenario for today is that the pair will remain close to the 1.09 level with some good deviations on either side as a significant direction would be difficult to justify.
In terms of my strategy, I don’t see any major reason for changes and I will wait for levels well above 1.10 to consider buying the USD.
