EUR/USD Daily Fundamental Forecast – August 29, 2017

The EURUSD pair continued to move higher on the back of dollar weakness that carried over from Friday. The closure of the UK markets on account of holiday has helped the dollar to sustain some sense of respectability as we could have seen much bigger losses if the London market had been open. This weakness in the dollar has been due to the failure of Yellen to address monetary policy during her speech on Friday and also due to the fact that Draghi also did not choose the address anything about the strong euro in his speech as well.

EURUSD Heads Towards 1.20 and Beyond

The fact that he did not try to play down the strong euro and in fact spoke about the strong eurozone economy was taken as a hawkish signal by the traders who have scrambled to buy the EURUSD pair since then. This has helped the pair to rise through 1.19 and it now sits just short of the short term target at 1.20. Of course, there could be some headwinds as the pair moves towards the 1.20 region as it is a round figure and hence a lot of sell orders maybe sitting there at the moment, maybe even to protect a large sized expiry as well.

So, expect a lot of trouble in the progress through 1.20 but if the pair does manage to breach through that region, we should see a smooth path towards 1.25 in the medium term for the pair. The London markets have not got a chance to react to the speeches from Yellen and Draghi as yet and so it would be interesting to see how they react when they open today and whether they are going to bring in some correction so that they can get in at better prices.

Looking ahead to the rest of the day, we do not have any major economic news from the Eurozone for today and we have only the CB Consumer Confidence data from the US and hence we do not expect economic events to impact the moves. But we are heading into the end of the month and hence are likely to see month end currency flows today with the EURUSD pair continuing to trade in a strong manner.