EUR/USD Fundamental Analysis – week of August 21, 2017
The EURUSD pair had a choppy week when it ended slightly negative but still the strength in the pair is clear for everyone to see. The pair closed above 1.1750 marking another week where it has successfully negotiated periods of strength in the dollar and increase in global risk but managed to come out of all this, largely unscathed. The strength in the euro is apparent as the market still believes that a large amount of fuel is still left in the tank as far as this bull run is concerned.
EURUSD Trades in Choppy Manner
If it was the escalation in the tension between North Korea and the US in the week before, it was the terrorist attack in Spain last week which increased the global risk and we saw a drop in the stock markets and a hike in gold prices as a result. This resulted in a lot of choppy action in this pair which included a couple of attempts to break through the bottom at the 1.1680 but both times, the pair was met with a lot of buying at the bottom which helped it to recover very quickly.
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This recovery has further improved the confidence of the markets. There was not much data from the Eurozone for last week while we got the retail sales data from the US which came in much stronger that expected. This led to a brief recovery in the dollar strength but that was laid to waste as the FOMC meeting minutes came out which did not specify any timeline for the balance sheet normalisation or for the next rate hike. This was viewed as dovish by the markets which again led to dollar weakness and helped the pair to stay within range.
Looking at the week ahead, the key risk event is obviously the meeting and the speeches at the Jackson Hole which is scheduled to be held on Friday. Draghi is expected to make a speech covering monetary and economic policy. A part of the market expects him to specify a major change in policy while another part does not expect any major policy shift, which will then be positive for the euro and is likely to lift the euro to 1.20 and beyond. There isnt much by way of economic news and so we can expect a lot of choppy action between the beginning of the week and the speech.