EUR/USD Daily Fundamental Forecast – August 22, 2017

It was expected to be a very quiet day of trading yesterday as it was the first day of trading for the week and also, it is the August month when some parts of the world are on holiday. This normally would mean low liquidity and hence low volatility but the EURUSD pair turned out to be the biggest mover of the day as it rose from the lows of its range to finally push through 1.18 on the back of some general dollar choppiness across the board.

EURUSD Moves Higher

The EURUSD has already spent a lot of time in a mode of consolidation and with the Draghi speech at Jackson Hole looming ahead at the end of the week, it may be time for some volatility in the pair. The speech comes so late in the week that parts of the market may not get the time to react to the speech when it happens and hence the traders in such markets might already have started positioning themselves for a hawkish Draghi. Apart from that, we did not have any major economic data from any part of the world and hence the market was generally quiet.

Some part of the market believes that Draghi is going to be hawkish in his speech, irrespective of whether he spells out a policy change or not and their belief is based on the improving data from the Eurozone which cannot be ignored any longer. This is the reason why we have been seeing the EURUSD pair refuse to buckle down to the dollar pressure over the last couple of weeks and continue to hold on to the 1.17 handle whenever it has got the opportunity and now we are seeing it move higher through 1.18.

Looking ahead to the rest of the day, we have the German ZEW Economic Sentiment which should lend further support to the euro if if comes out stronger, as is usual for any data from Germany. We expect the EURUSD pair to continue to move higher in the short term leading upto Friday.