EUR/USD Daily Fundamental Forecast – August 28, 2017

The EURUSD pair made good progress on Friday and managed to close the week near its highs. It is something that we believed and have been saying so in many of our past forecasts. The fact that the pair did not fall below the 1.17 for good despite the periods of strength in the dollar and also despite the fact that the pair was under some choppy trading, showed that the pair had a lot of gas left in its tank and it was only a matter of time before the pair moved up towards its first target of 1.20.

EURUSD Begins Its Next Bullish Leg

The latest move up followed the the Jackson Hole meeting and the speeches that were made on the sidelines of the meeting by Yellen and Draghi. These were the most anticipated events of the week and the pair had tightened itself into a coil ahead of these speeches. But the speeches were largely disappointing and did not give anything that the market expected or the market did not already know. Yellen chose to skip addressing monetary policy altogether and this is one more case where the Fed have refused to support the falling dollar and left it to the mercy of the markets. This led to the first round of dollar selling and the EURUSD pair made it back to the highs of its range at around the 1.1870 region.

On the other hand, Draghi did speak about monetary policy but there was nothing that the market did not already know. He said that he was happy with the way that the Eurozone economy was progressing and said that the inflation target had not yet been fully achieved but that they were close to doing so. This did not matter to the market which had already made up its mind to buy the euro and once the speech was done, there was another leg to the bullish run in the pair which saw the pair break through 1.19 and it continues to trade clearly above that as of this writing.

Looking ahead to the rest of the day, it is a holiday in the UK and we do not have much news from the Eurozone or the US. But we are getting close to the end of the month and we should be seeing some month end flows. We expect the EURUSD to continue to move towards its first target which is around 1.2.