EUR/USD Daily Fundamental Forecast – February 1, 2018

The EURUSD pair continues to move within a tight range over the last few hours as the FOMC minutes failed to have any impact on the dollar. It was more of the month end flows that seemed to dominate the price action in the markets over this period and so far, the moves have been limited to above the 1.24 region.

EURUSD Caught in Range

We had mentioned in our forecast yesterday that the action was likely to be dominated by the month end flows and that was the case yesterday. The 1.25 region appeared to be a magnet for a large part of the day as the pair made it way above the 1.2450 region but it failed to get through that region and once the London fix passed and the time for various option expiries were over, we saw the prices parachute down and now we see the pair trading just above the 1.24 region as of this writing.

Now that we have got the month out of the way, it is time for the traders to focus on the month ahead and it is likely that the dollar would come back into focus this month. The market is now looking forward to the rate hikes from the Fed and it all depends on how many hikes the Fed has up its sleeve for the coming year. That would be dependent on the incoming data and we saw the ADP employment report coming in much stronger than expected. The inflation in the Eurozone came in as per expectations and with the FOMC minutes striking a neutral tone, the action is now focussed on the NFP later in the week.

Looking ahead to the rest of the day, we do not have any major news from the US apart from the PMI data while we do not have any major economic data from the Eurozone. The consolidation is likely to continue with a bearish bias for much of the day as the market looks ahead to the NFP data tomorrow which is likely to be crucial in determining the rate hike timelines for the Fed.