EUR/USD: Euro on defence below 1.0500 level as any reaction attempt is short-lived

The single European currency is trading just below the 1.05 level in the early hours of Friday, trying to absorb some of yesterday's losses where the critical 1.05 level finally collapsed.

It was an expected development with high chances as all the weights that have been putting pressure on the European currency lately remain on the table.

The high geopolitical risk, the persistence of US government debt securities yields in high levels and concerns about the course of the European economy maintain the negative climate against the European currency, creating significant obstacles to reaction efforts.

Some signs of stabilization in US Treasury yields is on the table the recent days with the 10-year bond trading near the 4,40 level, showing signs of fatigue.

No changes in my assessment that soon we will see some decompression in yields, with a return of 10-y note near to 4,00 level being a likely scenario.

A possible de-escalation in the level of US yields is expected to provide significant relief to the European currency and room for further correction.

Concerns about the return of the ghost of inflation to the US economy continue to pressure the bets on possibility for another cut in key interest rates by the Fed in December.

Today's agenda is quite rich, with indicators for the course of the manufacturing and services sectors in the Eurozone and the United States expected with particular interest by investors.

I maintain a somewhat conservative approach and remain on hold. I would prefer to bet on a scenario of a correction of the European currency to some new strong dip and I would feel more comfortable to bet in favor of the euro at levels near 1,0400 level.