EUR/USD Daily Fundamental Forecast – October 30, 2017

The euro continued to move lower on Friday on the back of the weakness that was initiated by the ECB which postponed the tapering and this effect is likely to persist in the euro for the short term. There was a brief recovery of sorts when the dollar weakened late in the day on Friday but the effect of that is likely to be very little and we are likely to see the euro continue lower this week.

EURUSD Continues Lower

The euro has been hit hard by the decision of the ECB to continue the tapering till atleast September 2018 and this was contrary to the expectations of the market which was expecting the tapering to begin and end pretty soon. The incoming data from the Eurozone continues to be strong and hence it was a bit of a surprise for the investors who had been buying up the euro in large quantities for the past couple of months ever since the ECB had hinted on QE tapering in their meeting a couple of months ago.

Though Draghi has tried to play down the extent of this tapering over the last couple of months, as a means of controlling the strength of the euro, the market was in no mood to listen and continued to buy up more and more of the euro during this period. They were brought back down to the earth on Friday when the ECB made it clear that it was in no mood to give up on the QE just yet and this has served to weaken the euro. We may see a slight bounce in the pair today but the overall direction seems to have turned down.

Looking ahead to the rest of the day, we do not have any major news from the Eurozone or the US but as we approach the month end, we are likely to see some profit taking, position adjustments and some month end currency flow as well. We might see some consolidation and a small relief rally but any such rally is likely to be sold into and is likely to be short lived.