EUR/USD: Euro remain on reaction mode after last week's heavy losses

The single European currency is moving well above the 1.03 level, trying to extend Friday's reaction and move further away from the recent lows of 1.0220, which it hit a few days earlier with the opening of the markets for 2025.

The US dollar rally of the last three months appears to be temporarily on hold as, as I mentioned in a previous article, these levels are quite low and as the exchange rate approaches the critical level of 1/1, the feeling of uncomfort from ECB point of view is likely to increase.

Although in general the main factors that have affected the European currency in recent months remain on the table, the dust from them will probably slowly settle and new catalysts will be needed that will be able to fuel a new rally for the US currency.

Geopolitical risks, the difference in interest rates between the euro and the dollar, and concerns about the course of the European economy remain on investors' agendas, they just may start to fade at some point.

Today's agenda is quite interesting with German inflation and the eurozone investor confidence survey standing out, which if they surprise positively could help broaden the European currency's reaction.

As the new week opens, the European currency shows a willingness to maintain a defensive environment and avoid further significant losses that could drive the exchange rate even closer to the critical level of 1/1.

The thought I expressed in the previous article about buying the European currency well below the previous lows of 1.0330 seems to be confirmed as the reaction of the European currency that I expected is already on the table.

I will maintain this strategy of buying the European currency on dips in order to get some good reactions as I believe that the exchange rate will start to become ''heavier''  and  the picture of the previous three months will not be easy to repeat.