EUR/USD: Mild retreat for the Euro below 1.1200 level with room for more losses

The single European currency is trading slightly below the 1,12 level in a narrow range in early trading hours of the new week after Friday's strong gains.

Fed Chairman Powell's speech in Jackson Hole on Friday acted as a catalyst and the European currency managed to touch 1,12 level.

Fed Chairman sent quite strong signals to markets that the prospect of a September rate cut is closer than ever with bets now high enough that 25 basis points will be the next decision.

Fed Chairman's rhetoric came to further support the bullish momentum the European currency has been in the recent weeks, having now surpassed December 2023 highs and is poised to trigger higher prices.

Although several days have passed recent macroeconomic fundamentals on the fatigue of the US labor sector and a significant easing of inflationary pressures now give room to Fed to proceed with the first cut in key interest rates in many months by narrowing the interest rate gap between the euro and the dollar, something that has weighed heavily on the American currency in recent weeks.

Let's not forget, however, that similar moves are expected from the European Central Bank as its economy remains weak and inflationary pressures are also limited.

The intense speculation that has been set up around the prospect of a rate cut by Fed I believe will definitely show signs of fatigue as the decision is now priced in and relatively soon the US currency may will limit its losses and find itself at better prices.

Today's agenda included the IFO institute survey on the climate and outlook for the German economy which did not provide any surprises while on the other side of the Atlantic stand out  Durable Goods orders.

I have implemented my idea as I mentioned in a previous article and I have already positioned myself in favor of the US currency at 1,12 levels considering that the upward momentum of the European currency is close to the end and the exchange rate will correct.