EUR/USD Fundamental Forecast – September 30, 2016

It was a day about the EURGBP pair rather than the EURUSD pair. Many traders could not make any sense of the movements of the Euro but they would understand it better if they understood what was moving the Euro. The Euro was not driven by anything happening in the Euro region or the US but more by the month end flows associated with EURGBP.

The UK has to pay more than a billion pounds every month as part of its membership in the European Union. This settlement happens at the end of every month, either on a single day or over 2-3 days depending on the liquidity in the market and the volatility and we believe that was what was driving the Euro yesterday with lot of Euro buying and pound selling and when the liquidity dried up, euro was brought down and pound was brought up. Rinse and Repeat.

The EURUSD did seem to make a bid on the upper side and reached as far high as the resistance at 1.1250 but it was promptly slapped down by the news in the US session about fears surrounding the situation at Deutsche bank. This spooked the markets and led to a risk off sentiment which usually strengthens the USD and thats what happened in the US session. The pair went down to the bottom of its range at 1.1200 and it continues to lounge about in this area at 1.1209 as of this writing. Expect more of range trading today between 1.1180 and 1.1250 as the Euro gets pushed and pulled in both directions by month end flows. Traders need to be wary about the Deutsche bank news which could also spook the markets like yesterday. Traders would be safe as long as they maintain trading the extremes of the ranges.

There is no major news to be released from the Euro region today.