EUR/USD Fundamental Analysis – week of March 26, 2018

The EURUSD pair continued to trade within the same range that it has been in, over the last few months. On the upper side, we have the 1.2450 acting as the top of the range while at the bottom we have the 1.2250 region acting as the bottom and try as they might, the traders have been unable to break through this range for much of the time.

EURUSD  In Range

It was a week that was nominated by geopolitical events rather than by economic data and even the large volatility that was expected from these events did not do much to help the pair break through the range. That is the reason why we have been seeing the euro within the tight range. We saw the Fed rate announcement and the first press conference from the new Fed Chief but this was not far off from what the market had expected. The Fed hiked rates as expected and this was already priced into the markets. Powell reiterated the strength in the UUS economy and expressed the hope that it would continue but stopped short of laying out a timeline for the future rate hikes. This was dollar negative and it forced the pair through the 1.24 region but it did not make much headway beyond that.

Then came the news that the US administration had imposed tariffs on many of the Chinese goods and the Chinese retaliated as well. The Eurozone leaders also joined in and this led to a lot of risk and worry that this would lead to a global trade war in a slow and steady manner. This caused the stock markets to crash and in a strange sense, it helped the dollar to strength as well as it was considered as a decent safe haven in such circumstances.

Looking ahead to the coming week, it would be the last week of the month and hence the amount of economic news and data would be less but we are likely to see a lot of month end flows. Also, the market has enough geopolitical news to deal with and this is likely to bring in a lot of volatility in the markets. We believe that the pair would continue to consolidate within the range but with the threat of the topside break looking large.