EUR/USD Daily Fundamental Forecast – January 30, 2018

The dollar has been on the backfoot since the beginning of the month and not many gave it a chance for the short term. But over the last few days, the dollar has been gaining ground, so much that yesterday, the dollar was one of the strongest currencies around. This may have been a surprise to the markets but this shows that the perceptions have begun to change.

EURUSD Corrects Lower Still

We have been mentioning this in our forecasts over the last few days that the momentum seems to have been lost as far as the dollar bears are concerned and we are probably seeing the first signs of cracks and weakness in the euro bull run. Though there has not been any fundamental or economic news that has been positive for the dollar during the last few days, it has been driven higher by the sheer anticipation that something good is around the corner. The market always tends to move faster than the actual news and thats what we are seeing.

The good news that the market is looking forward to, is some strong economic data from the US which would force the Fed to be hawkish and bring forward the timeline for the future rate hikes. So far, the market expects the Fed to make 3 rate hikes during the course of the year but if the incoming data continues to be strong, then it hopes that the Fed would be tempted to bring in more rate hikes and this would be hawkish for the dollar. This is one of the main reasons why we are seeing the dollar strengthening across the board.

Looking ahead to the rest of the day, we are heading towards the end of the month and so the traders must be careful about the month end flows and the option expiries and this could lead to volatility which may not conform with the actual strengths of the currencies involved. So we would advise traders to be careful over the next couple of days. There is not much by way of economic data from the US or the Eurozone for today.