EUR/USD: Tight trading range remains in play, 1.0600 level remain a challenge

The single European currency is trading marginally below the 1,07 level in the early hours of Wednesday in a narrow trading range that remains on the table for one more day.

Yesterday did not give any surprise as in a poor agenda the minimal announcements and the statements of some Fed officials did not bring anything new to the table.

The exchange rate has been extremely compressed lately which increases the risks of a sharp and intense decompression that will break critical levels executing potentially large stop-loss orders.

Bets remain unchanged on the prospects for a rate cut by the Fed and the ECB with 2 more cuts by ECB and possibly one towards the end of the year by  Fed being the most likely scenarios at the moment.

Τhe interest rate gap in favor of the US currency remains for now the main barrier which makes the prospect of the European currency moving easily enough above 1,10 a very difficult task.

Αlthough lately several macroeconomic data from the United States have disappointed, the interest rate differential in favor of the US currency is likely to help the US currency to move higher and the targets of 1.05 - 1.06 levels are achieved.

Αnd today's agenda is relatively lean with US new home sales being the only notable macro data.

I struggle to see any catalyst that could change the overall picture of the market today, and the most likely scenario is for the exchange rate to remain in a narrow range of fluctuation, approaching - perhaps a bit closer to the 1,06 level than the previous days.

No change in my thinking, I remain on hold.