The single European currency is maintaining a slight upward momentum and has already secured the level of 1.09 at the beginning of the week, but further gains are likely to be a difficult task for today in a very poor agenda.
Last week was marked by an impressive return of the European currency to the forefront and with gains of almost 300 basis points, it was at the highest prices of the last quarter above the level of 1.09.
With the possibility of a further hike in US interest rates off the table, the US dollar has come under pressure as US Treasury yields have retreated from recent highs, while the geopolitical situation, while not improving, shows no signs of significant escalation.
In such an environment, the need to buy the dollar, which has traditionally acted as a safe-haven currency, has been limited, while the speculation that had been built up around a further rise in US yields has gone out of play for the time being.
However, I do not believe that the overall market picture has changed significantly, as the recent strong momentum of the European currency could be considered a very good reaction, something I have repeatedly mentioned in previous articles, as the European currency maintains this characteristic with high fidelity.
Today’s agenda is extremely light without any major announcements and the most likely scenario is that the exchange rate will be confined to a narrow range with a further rise in the Euro towards the 1.10 level would be a surprise for today.
In any case, I think that around 1.10 the European currency will show signs of fatigue and my thinking has now shifted away from euro long positions. I am starting to think that around 1.10 could be a good position in favor of the US dollar.
I don’t see any significant reason for the European currency to continue its strong upward momentum of the past week, as the news of lower inflation in the United States and the Fed‘s move away from another rate hike will soon fade.