EUR/USD Daily Fundamental Forecast – December 22, 2016

The ranges get tighter and tighter as we head into the upcoming holidays. Though the holiday period extends for 2-3 weeks right from before the Christmas weekend to the second week of January, it is usually the week leading up to Christmas that is the tightest in range and the lowest in terms of liquidity and volatility. Lets face it. Christmas is a bigger festival than what the New Year will ever be. New Year is just an event while Christmas is something of much more significance and something that is much more holier than what New Year can ever hope to be. That is why we find some traders return back to the trading after a couple of days after Christmas and we find that the volatility picks up.

Another reason is that towards the end of the year, we find the month end and year end flows kicking with many funds and banks needing to balance their books, show some decent returns for the investors, charge management fees for the funds etc. and this leads to some adjustments in the currency and investment holdings and this tends to increase the volatility towards the end of the year, with thin markets around. In any case, yesterday was a tight ranging day for the EURUSD pair with it being stuck in a 65 pip range. But we did see some dollar weakness yesterday which helped to keep the bid under this pair and hence it consolidated in the higher region of its ranges just below 1.0450 and continues to trade strongly as of this morning.

Looking ahead to today, we do not have any major economic news from the Euro region but we do have the final GDP data from the US later on in the day. This could lead to some volatility if the data misses the expectations and come in lower. If it does so, we could see the pair break through 1.0460 resistance region and head for 1.0500 and beyond. If the data comes in strong, we could see the pair back below 1.0400.