EUR/USD Daily Fundamental Forecast – january 23, 2018

The euro had a quiet session yesterday, a session in which it made the customary move towards the lows of its range near the 1.22 region which was then followed by the usual move higher which we are seeing now as the EURUSD pair is trading above the 1.2250 as of this writing. We believe that this is likely to continue ranging in the short term.

EURUSD In Tight Range

The pair moved lower on what turned out to be a dull day of trading in the pair but it still managed to end the day where it began. There was not much volatility in the pair and all the volatility that was available was locked within a tight range. This is how the pair has been moving over the last couple of weeks and the lack of fundamentals and lack of economic data as we enter into the final stretch of the month is showing up very clearly in the form of a lack of direction and volatility. Also, the market seems to be waiting for what the ECB would throw up later in the week.

We have the ECB rate announcement and the press conference from them later in the week and during this time, it is expected that the ECB would try and tone done some of the expectations of the market regarding the QE tapering. The market expects the ECB to shut down QE by the end of the year and by all signs of it, we dont think the ECB has much of a choice beyond that. But, on the other hand, the ECB would like to control the pace at which the euro is rising as the dollar is also weak at the same time and this combination of euro strength and dollar weakness would be dangerous for the economy.

Looking ahead to the rest of the day, we have the economic sentiment data from Germany but apart from that, there is no economic data from the US or the Eurozone. We can safely expect the prices to be driven by trade flows and option expiries during this period and hence, expect some more ranging and consolidation.