It was a smart recovery from the EURUSD pair during the course of the week but it was something that was well telegraphed much before it actually happened. The pair fell through the 1.18 region and made its way towards the support region around 1.1720 on the back of some recovery in the dollar strength. Also, the growing tension between North Korea and the US kept the markets on tenterhooks as this environment of increased risk led to some choppy trading in many pairs and the dollar was able to take advantage of that.
EURUSD Makes a Smart Recovery
For a couple of times during the course of the week, the pair tried to break through the 1.17 region and we had been mentioned that this region was like a line in the sand for the bulls and the bears. If we had managed to break through this region cleanly, then we would have been looking at a lot of selling but both times, it did not happen and both times, the pair managed to bounce very strongly from its lows. This was a clear signal that the pair was still under the control of the bulls and that it was only a matter of time before the reversal happened.
The key data event for the week was the CPI inflation data from the US. The data from the US over the last couple of months had been week but the strong NFP report had raised hopes of a recovery. So, the inflation data was viewed as key but it disappointed as well as it came in weaker than expected at 0.1%. This led to a round of selling in the dollar which helped the EURUSD pair to break through the 1.18 region once again and close the week near its highs.
Looking ahead to the coming week, we are likely to see the geopolitical tensions continuing to remain high with the US and North Korea trading charges against each other. On the data front, we have the retail sales data from the US and the FOMC meeting minutes, both of which are likely to bring in a lot of volatility. We still believe that the dollar has another round of weakness left and we could see the EURUSD pair move towards 1.20 as a result of that.