EUR/USD: Risk of a sharp decompression increases as Euro remains close to 1.1150
|The single European currency is trading marginally above the 1.1150 level in the early hours of Monday, remaining in an extremely tight range for nearly 5 weeks, raising the possibility that at some point there will be a sharp decompression and the exchange rate will change levels.
The attempt of the European currency to secure levels above 1,12 last week was not successful as it only temporarily managed to break the 1,12 level without managing to stay above it.
Last week's macroeconomic news was mixed on both sides of the Atlantic which restrained investors from taking big bets thus keeping the exchange rate in a narrow trading range.
In general the behavior of the exchange rate confirmed my thinking as they have been expressed in previous articles as I maintained significant doubts about the ability of the European currency to continue an upward momentum but on the other hand I failed to find an entry point to buy the US currency.
Although there is some distance from the next Fed and ECB meetings, bets on the intentions of further reduction of interest rates continue to monopolize the interest and influence the course of the exchange rate.
Although the gap in the difference in interest rates has narrowed after the latest reduction of 50 basis points by Fed, the difference remains in favor of the American currency, and along with the concern about the course of the European economy remains at the moment the two main weights in the effort of the European currency to move much higher approaching the levels of 1.14 - 1.15, which in my view may be the higher prices that the European currency could achieve until the end of 2024.
On today's agenda stands out the announcement about the course of inflation in the German economy which, despite moving on the edge of recession, remains the steam engine of the European economy and any macroeconomic data concerning it is likely to affect the European currency, especially in the event of a surprise.
While on the other side of the Atlantic the speech of Fed President Jerome Powell on the course of the US economy stands out.
Nothing new in my thinking, I continue to remain on hold maintaining a desire to buy the US currency on some sharp peak well above the 1.12 levels.
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