EUR/USD Fundamental Analysis – week of April 30, 2018

The EURUSD came under severe pressure over the last week as we saw the pair break through the lows of the range for the first time in several weeks on the back of sustained dollar strength. Last week saw a combination of dollar strength and euro weakness.

EURUSD Breaks Through Range Lows

The euro weakness was brought about by the fact that the ECB kept the rates on hold and also refused to give a timeline for the tapering and ending of the QE. The strong incoming data from the Eurozone towards the end of last year signalled that the end of the QE was close and it was also speculated that the QE would be ended by the close of 2018 and then the ECB would focus on hiking rates in the beginning of the coming year. This was priced into the markets as the ECB also added to the bullish fire.

But that anticipation had damped down over the last few weeks as the incoming data has got progressively weaker and last week, we saw the ECB President Draghi sending out a note of caution that the central bank is watching the situation and the economy closely. This was enough for the traders to sell off the euro which had already been weak due to the gaining dollar over the first few days of the week, which was seen all across the board.

Looking ahead to the coming week, we are going to see the end of the month and the beginning of the new one and hence we can safely expect some strong currency flows. Also, with the recent range being broken and the dollar o thw war path, we can safely say that the weakness is likely to continue in the short term which should see the pair making a beeline towards the 1.20 region. We are also going to see the NFP employment report. After the weak report from last month, the dollar bulls would be hoping to see a rebound in the data and if and when that begins to appear, we should see the dollar gain in strength even more in the short term which should act as the trigger for further weakness in the euro.