EUR/USD: Euro on defense near 1.1050 level as the Middle East on fire

The single European currency is on the defensive mode near 1,1050 level trying to limit yesterday's significant losses in the wake of Iran's missile attack on Israel.

Dramatic developments from the Middle East front strengthened the US dollar which traditionally acts as a safe haven currency with  1,10 level be the next major challenge for the exchange rate.

At the same time, the reduction of inflationary pressures in the eurozone as shown by yesterday's data increase the chances of a further reduction in interest rates by the European Central Bank at the next meeting.

While the recent statements by Fed President Jerome Powell regarding the risk of remaining inflationary pressures in the American economy has reduced the possibility of another reduction of 50 basis points at the next Fed meeting.

In such a risk-averse environment and with the prospects of further interest rate cuts from the Fed and ECB being quite cloudy the European currency has once again come under question in the last few days having moved well away from the 1.12 levels.

This development fully confirmed my thoughts as expressed in previous articles as I had significant doubts about the ability of the European currency to continue its upward momentum but unfortunately failed to find the right entry point to buy the US currency.

Despite the dramatic developments in the Middle East, the general picture of the market shows minor differences, with the geopolitical landscape gathering all the interest for the time being, leaving a secondary role to macroeconomic figures.

The fluctuation range between the 1.10 - 1.12 levels that the exchange rate has been in for the last few weeks remains in play, which increases the possibility that very soon we will have a sharp decompression in the pair with significant extensions outside these levels.

On today's agenda, in addition to geopolitical developments, unemployment in the eurozone stands out, as well as the next preliminary data on the labor sector in US before Friday's very critical data on new jobs outside the agricultural sector and the unemployment rate.

In a high risks environment with significant geopolitical developments, a wait-and-see approach remains the best idea having now moved well away from the desired levels for buy US dollar.