EUR/USD: Maintains Tight Range Trading, 1.0600 Level Remains A Challenge

Early Wednesday, EUR/USD traded near 1.0700, maintaining a tight range.

Yesterday was no surprise, data was light, and speeches from Fed officials did not bring anything new.

The euro exchange rate has been under heavy pressure recently, which increases the risk of a sharp and violent fall in the exchange rate, which would break key levels and could see a large number of stop-loss orders executed.

Bets on the prospects of rate cuts by the Fed and the ECB remain unchanged, with the most likely scenario now being two more rate cuts by the ECB and one by the Fed, possibly by the end of the year.

For now, the interest rate differential in favor of the US currency remains the main obstacle, making the prospect of EUR/USD moving easily above 1.10 very difficult.

While some recent US macroeconomic data have been disappointing, the interest rate differential in favor of the US currency has the potential to help the US dollar move higher, which in turn could push EUR/USD towards the 1.05-1.06 target.

Today’s agenda is relatively sparse, with US new home sales being the only macro data of interest.

It’s hard for me to see any catalyst that would change the overall picture in the market today, the most likely scenario is that the exchange rate remains in a tight range, close to – maybe closer to the 1.06 level than in the past few days.

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