EUR/USD Daily Fundamental Forecast – August 31, 2017

The EURUSD pair seems to be in a reversal mode as the pair continues to fall over the last 24 hours and as of this morning as well. The driver for this move has been the recovery in the US dollar which continues as of this writing and the pair now threatens to make a clear break through the 1.1875 region which could signify a crucial break of support and lead to even more selling in the short term.

EURUSD Corrects Further on Dollar Recovery

It was a good day for the dollar as the focus was clearly on it during the course of the day. The weakness in the EURUSD pair had started a day earlier as its move through the 1.20 region to the highs of the year was rejected in a strong manner and since then, the pair has been moving lower. The weakness continued during the Asian and London session yesterday but the focus was on the ADP and the Prelim GDP data from the US.

Both these pieces of data came in much stronger than expected as the ADP employment data came in at 237K when the expected was 185K while the Prelim Q2 GDP data came in at 3% when the expected was only 2.7%. These 2 strong pieces of data raised the confidence in the US economy and also increased the possibility of the Fed hiking rates this year and helped the dollar to get stronger. This led to the move of the EURUSD pair below the 1.19 region and it continues to trade in a weak manner.

Looking ahead to the rest of the day, we do not have any major news from the US but we have the flash CPI estimate for the Eurozone for today which could support the euro temporarily while the month end currency flows are likely to bring in a lot of volatility in the EURUSD pair and other pairs as well, for today. The key would be the 1.1875 region and a break of this could open up 1.18 and 1.17.