EUR/USD Daily Fundamental Forecast – August 15, 2017

As expected, the EURUSD pair spent much of the day yesterday consolidating in a tight range with a small bearish bias as the dollar strength was seen all across the markets. The trading seen on the first day of the week is generally slow with less liquidity and volatility and hence, we should not be drawing too many conclusions from such kind of trading. We are likely to see much more liquidity and volatility from today onwards and it is important for the traders to be ready with their ammunition for days like today.

EURUSD in Consolidation

Yesterday was a day when the dollar gained back some of its losses from last Friday after the bad CPI data. The data came in weaker than expected and this led to a belief that the Fed is likely to delay the next rate hike to next year and this was bad for the dollar. On the other hand, the stock markets loved the bad data and rose higher and this combination of events continued to dominate the markets on Friday. But yesterday, we saw the dollar recover though there was nothing fundamental to the recovery as such.

The EURUSD pair was on the backfoot right from the beginning of trading in the morning and it continued to be weak through the course of the day as it moved below 1.18 and then went below 1.1780 for a brief period. But despite the weakness in the pair, it did not appear at any point that the pair was preparing itself for a large fall or there was any reversal or anything of that sort and this ensured that the move was pretty much limited and controlled.

Looking ahead to the rest of the day, we can look for more volatility and liquidity during the day today as we have the retail sales data from the US which is probably the third most important economic data from the US after the NFP and the CPI data. The dollar bulls would hope that this data would help to point them in the right direction by coming in stronger but if it does not, then the EURUSD pair could well be on its way towards 1.20.