EUR/USD: The Euro returns to the fore, 1.07 the next challenge

January 9, 2024 2:27 PM +07:00 - The single European currency in a move that surprised many during the day yesterday very easily broke the level of 1,06 and after securing it and has remained easily above it is now ready to challenge 1,07.

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Yesterday's movement of the European currency in general fully confirmed my thinking as expressed in previous articles as although the general sentiment clearly favored the US currency I had a specific refusal to position myself in favor of the US currency at these levels.

I had a strong belief that the reactionary behavior of the European currency will come back into play again which was seen in a characteristic way yesterday.

Although there was no specific catalyst the European currency took the opportunity to show a mild upward momentum as US Treasury 10y  yields had a slight deceleration after earlier climbing to 5%.

At the same time a small Hope of de-escalation on the Middle East front is seen on the horizon which limits need for dollars which traditionally functions as a safe haven currency.

In my opinion, however, it is still too early for such conclusions and unfortunately there is still a way to go until full de-escalation on this front.

Today's agenda is considerably richer than yesterday's with the announcement on the path in the manufacturing sectors in the Eurozone and the United States standing out.

International stock markets are temporarily showing a stabilization trend after yesterday's losses, something that can support the European currency, but without any signs of a strong reversal of the trend.

In general a possible scenario for the continuation of the day is that the market will digests these levels and I would consider it difficult for the European currency to present the same picture as yesterday and have a continuation of yesterday's rally with  approaching the 1,08.

But testing the 1.07 levels especially since the data we expect today support such an outlook is a realistic scenario.

While let's not forget that as we approach Thursday and even though the European Central Bank's decision is fully expected, it is quite possible that investors have preferred a wait-and-see attitude without big bets on the table, which may in turn limit the prospects for the upward rally of the euro to have a long continuation.

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