EUR/USD Daily Fundamental Forecast – May 24, 2017

The EURUSD pair corrected itself during the course of the last 24 hours and sits below 1.12 as of this writing. It did make a brief attempt at the range highs in the 1.1260 region yesterday but that attempt was promptly beaten back by the sellers which has now led to this round of correction. We believe that this round of correction would turn out to be much deeper than many of those over the last week as the focus shifts to the Fed and the rate hikes.

EURUSD Likely to Correct Further

There were a lot of small positives for the US dollar yesterday which led to the strengthening of the dollar across the board. We saw the Fed member Harker saying that he still believed that a rate hike in June was a distinct possibility. The market had fully priced in a June rate hike till about a couple of weeks back but the political turmoil faced by Trump had led to a belief that it would interfere with the Fed decision and we have been seeing the markets rolling back the pricing in. But Harker said that he believed it was still a possibility and he also said that there are most likely, atleast 2 more rate hikes in this year. This was a boost for the dollar.

We have the FOMC meeting minutes late in the day, and over the last couple of months or so, the minutes have generally tried to look at the positive side of the economy and the same is likely to be the case today as well, which should again support the dollar. Also, we are seeing the markets beginning to believe that, with the political issues in the US slowly fading away, the possibility of a rate hike in June is increasingly and the market has begun to price in the same again as well.

A combination of all these has led to dollar strengthening and a correction in the EURUSD pair which sits in the support region at 1.1180 as of this writing. As the dollar strength grows, we should see this support give way and the pair moving towards the 1.1120 region. Things will become more clear once the minutes are released later in the day.