EUR/USD Fundamental Analysis – week of October 24, 2016
This was a week when there was finally a break in the tight ranging that has been gripping EURUSD and tantalising the traders for the past few weeks. Though the prevailing USD strength did contribute to the break, the bigger reason was obviously the press conference that was made by the ECB President Draghi on Thursday. In this, despite repeated questioning about the QE tapering, Draghi avoided being directed except saying that there was no discussion on the QE tapering and that the QE cannot be stopped overnight. This gave an impression that the ECB itself was not in agreement over the timeline and the details would be known only in December. The market seldom likes confusion and dilly-dally and they showed it.
The pair was already under the firm grip of the bears and the only hope for the bulls had been the announcement for tapering but with that announcement not forthcoming, the bears took full control breaking through the support at 1.0950 and then through 1.0900 and took it as far down as 1.0860 and it sits at 1.0880 at the end of the week. The bounces have been few and they have had no intensity at all, signs showing that the bears are in control. But the fall has not been dramatic and it has been a slow and steady move downwards.
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Looking ahead for the week, we are bit light on the economic data as we approach the end of the month. We have the German Ifo Business climate and a speech by Draghi and ending the week with the Advance GDP from the US, all of which have the capability to affect the price. The pair looks set to drip down towards 1.0830 which is the low from March and there we can expect some support. On the fundamental side, we believe that the market is overreacting a bit to the QE tapering thing and with the US Fed not yet sure of the timing of the US rate hike, there does seem to be a possibility of a stall or a bounce in the price of this pair. But for now, the pair is under the clutches of bears and any bounce will be met with a lot of selling which is what our users should also be looking into.