EUR/USD Daily Fundamental Forecast – September 21, 2017

The pair crashed lower yesterday on the back of the hawkish Fed and this is what we had warned in our forecast yesterday. The pair is now back in the lows of its range and it looks pretty weak in the face of a recovering dollar which received a boost from the Fed yesterday. We expect the pair to continue to weaken in the short and medium term and that would mean that the uptrend in the EURUSD pair is officially over.

EURUSD Crashes on Hawkish Fed

Since the beginning of the week, the attention of the market had been purely focussed on the dollar and the FOMC statement and announcement and the dot plot that usually accompanies with the announcement. The dot plot basically tells the market what each Fed member thinks where the rates should be and hence it gives a guidance for the future of rate hikes in the US. As expected, the Fed decided to hold rates and the announcement also did not have anything too hawkish.

The key yesterday was the dot plot in which it clearly showed that the Fed members were leaning towards a rate hike in December. The incoming data from the US has been choppy over the past few weeks and this had led to some confusion on whether there would indeed be another rate hike this year but the dot plot kept that door firmly open. Of course, the actual hike would depend on the data coming in over the next couple of months but there are indeed some signs that the US economy is on track and this should help the Fed makes its decision.

This led to a strong bought of dollar buying which led to a crash in the EURUSD pair which now trades below the 1.19 region as of this writing. It looks as if it is only a matter of time before the pair crashes through the range lows at 1.1860 and once that happens, we should see the pair moving even lower. Looking ahead to the rest of the day, we have the unemployment claims data from the US and ECB President Draghi making a speech which should keep the markets busy.