EUR/USD Daily Fundamental Forecast – December 20, 2016

EURUSD has been under pressure over the past 24 hours partly due to the continuing strength in the dollar and also partly due to some geopolitical events as well. The pair began brightly yesterday and was looking to break the strong support turned resistance at 1.0465 region but try as it might, it could not get through that. The German Ifo Business Climate data came in better than expected but even that was not enough to push the pair through that region.

This continued till the US session and that is when the weakness began to set in. Then we had the Fed Chief Yellen making a speech where she sounded very upbeat about the current status of the US economy as she mentioned that the job growth had been the best in a decade and that the Fed was also looking at signs of wage growth in the coming months. This was hawkish for the USD and this increase the dollar buying and pushed the EURUSD pair lower. Then we had the unfortunate news of an attack on a Christmas shopping crowd in Berlin and this increased the risk off mood and pushed the pair below 1.0400 for a brief while. The pair sits just above 1.0400 as of this writing and it looks weak and we could be seeing more weakness as the day progresses.

Looking ahead to today, we do not have much news from the Euro region or the US region and hence the pair is likely to be swayed this way and that by the currency flows. We also expect the weakness in the pair to continue though with many supports nearby and with liquidity drying up due to the holiday season, we could be in for more of a consolidation with a bearish bias rather than a large fall as such. We could probably see the pair dripping lower and any bounce towards the 1.0465 should be viewed as an opportunity to sell the pair with a tight stop loss beyond that region.

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