EUR/USD Daily Fundamental Forecast – October 26, 2016

EURUSD, as expected, continued to consolidate but it certainly seems to be stronger and inspires a bit more confidence for the bulls this week than it has been doing for the past couple of weeks when it was undergoing a slow drip downwards. This has been mainly due to the economic data getting better and better from the euro region and the fact that it is near a strong support region also helps it technically to continue it consolidation. It still cannot seem to be able to break 1.0900 with any sort of conviction though and that remains a concern for the bulls.

Yesterday, we saw the release of the German Ifo Business Climate data and that came in at 110.5 which was better than the expected 109.5 value and the data indicated a strong rise in manufacturing which proves that the base of the economy is still pretty strong. This continuing strong economic data from the Euro region and Germany in particular (which is the biggest contributor to the Euro region) has helped to keep the euro supported despite the growing USD strength based on increasing expectations of a Fed rate hike in the US in December.

During the US session, we saw a sudden volatility in the USD for no apparent reason though it was blamed on the weak consumer confidence data that trickled in. This helped the EURUSD pair to move as low as 1.0850 and as high as 1.0905 during the US session but it came back down below 1.0900 and sits at 1.0888 as we write this and seems pretty comfortable settling there.

Looking ahead to today, there is no major news scheduled to be released from the Euro region and the only news during the US session would be the Oil inventory which is unlikely to affect the prices of this pair. But with this being the last week of the month, there are settlements to be made and some large option expiries as well which will guarantee some volatility in this pair. We believe that EURUSD will continue to remain supported today and will be looking for a break of 1.0900.

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