EUR/USD Daily Fundamental Forecast – October 11, 2016

The day was slow, the day was calculative trading, the day was of low volatility but it still produced some surprising moves in other pairs. But in EURUSD, it was the same story all over again. The pair could not break above the hourly 200 SMA which we had pointed out as a resistance in our forecast yesterday. The day also saw the USD strengthening again and this put additional pressure on the pair and the pair then parachuted down to the support at 1.1150 which held during the US session. It was a holiday in USA and Canada yesterday and this was reflected in the low liquidity and volatility throughout the day though the theme of USD strength was quite uniform. This low liquidity was used by the bears to push down the price further towards the lows on Friday at 1.1110. There is a lot of support in this region and it remains to be seen whether we can get a bounce here, like we saw on Friday.

Looking ahead, we have the German ZEW Economic Sentiment scheduled to be released today and this may cause some volatility in the pair during the Euro session. The US and Canadian markets will be open again and this could also add more volatility in the market and we will be able to see whether 1.1110 will continue to hold or whether the selling pressure would be too much which might force a break of the support which will then bring 1.1050 back into view again. Again, technically and fundamentally, as we have been saying for long, this pair is caught in tight range trading and we find no reason for this pair to break out of the range anytime soon. So expect some more range trading between 1.1100 and 1.1200 for today and those who believe in this range can go long at the lows. This is likely to continue over the next few days irrespective of what happens to the other instruments as the banks and other major institutions seem to have made up their mind to prop up the euro under all circumstances atleast for now. It would be a challenge for them to continue to do so after the US Fed starts hiking rates but till then, we expect this pair to continue to trade within a tight range, a dream come true for range traders.

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