EUR/USD Fundamental Analysis – week of April 16, 2018

It was a week of tight trading as the market focussed on the geopolitical issues rather than the economic data and events as well. It was also a week where there was a lot of risk abounding in the market but all that was swept aside for the most part as the impact from these were pretty much limited for most of the time.

EURUSD Still in Range

The euro was driven higher during the first half of the week on the back of worries that the economic data from the Eurozone has been getting progressively weaker over the last few weeks. This is indeed an irony that the euro is getting stronger when the economic data is getting weaker but the trick lies in the QE program. As the data gets stronger, the possibility of a quick end to the QE gets higher and this keeps the euro weaker. On the other hand, the weaker data would ensure that the QE is continued for longer.

We had some strong incoming data towards the end of last year and this had led to the ECB considering ending the QE quickly but now there are doubts on what course of action the ECB is likely to take in the coming days and that is why we are seeing the price action in the euro being choppy. Though the ECB continues to stand by its call that the economy is strengthening and on target, there is no solid data to prove this and that is why we have been seeing the pair trading within a larger range over the last week.

Looking ahead to the coming week, we are going to see the retail sales data from the US. We are also seeing the escalation in the conflict in Syria and this is going to get worse as the days drag on and there is no end in sight for the war. The market cannot continue to ignore the developments in Syria and that is the reason why we are likely to see the market remaining volatile in the coming days. This is also the reason why we are likely to see that the ranging in the euro, that we have been seeing over the past many weeks, is likely to continue in the upcoming week as the market deals with the geopolitical developments.