The single European currency has fallen back to the 1.08 level and is struggling to hold this level.
The mild bearish momentum that has been maintained since the beginning of the month remains in play, and the exchange rate is already down more than 200 basis points from the high of 1.1017 reached on November 29th.
Yesterday’s market behavior justified the thoughts expressed in yesterday’s article, as the exchange rate remained in a narrow range around the 1.0850 level without any major surprises.
Announcements and some statements from officials brought nothing new to the table and the momentum remains slightly bearish as bets on a shorter rate cut by the European Central Bank have appeared on the table.
At the same time, the recent rally in international equity markets is showing signs of relative fatigue, which, if it becomes more pronounced, is expected to further strengthen the traditional safe-haven US currency.
Let’s also not forget that the geopolitical situation remains uncertain and developments in the Middle East continue to be dramatic with the potential for escalation.
In such an environment, regaining a strong upward momentum for the European currency remains a difficult task and the scenario of the market remaining cautious with digestive behavior and perhaps further losses for the European currency remains the most likely for now.
Today’s agenda is quite full, with producer inflation in the Euro-Zone and the performance of the services sector in the United States standing out.
Possible deviations from the estimates are expected to affect the exchange rate, but in any case I think that the market will remain cautious as we go through a week characterized by important news for the United States labor sector, which will announce important data until Friday.
So, although the European currency is in a mild downward momentum, I estimate that this will not take large scale and there will be reaction signs that I recall that the European currency shows quite easily and with good fidelity.