EUR/USD Fundamental Analysis – week of August 28, 2017

The EURUSD pair finished the week at its highs in what was essentially a dull week for most of the time which sprung into life late in Friday night as Draghi and Yellen took center stage. This was the event that the market had been waiting for since the beginning of the week and we had also been saying that something had to give, irrespective of what they said, as the build up to the event, in the markets, was simply sending out a lot of signals that something was going to happen.

EURUSD Continues Higher

Most of the week was dominated by consolidation and ranging in the pair as the markets sat in anticipation of the meet at Jackson Hole and the speeches thereafter. In fact, as the week wore on, the pair began to crawl and there was not much movement on either side and it was clear that the pair was coiling up. But we had been mentioning in our forecasts that the fact that the pair was not falling was a sign that the market is bullish as it was waiting for the speeches and thats what we got on Friday.

Yellen and Draghi spoke on the sidelines of the meeting at Jackson Hole but the speech from Yellen was a dampener as she neatly avoided touching the monetary policy. The market was a bit apprehensive that she might say something that is hawkish for the dollar and the fact that she did not helped the EURUSD pair to recover from the low 1.1800s to the region around 1.1870 as the dollar weakened all across the markets. Draghi also did not say anything new though he did mention that the signals of economic recovery in Europe was there for everyone to see. This was enough signal for the market, that was already long on the euro, to buy even more euros and this helped the pair to move through 1.19 and end the week at the highest levels that it has been since 2015.

The upcoming week is also likely to be volatile as the market digests all these news during the first half of the week. It is also the end of the month and so we  are likely to see end of month currency flows. Then the new month brings along the ADP and NFP data from the US which would again rock the markets. We continue to believe that the EURUSD pair would move higher into 1.20 where it is likely to face some resistance as it is a round figure and if its moves through that, then we should see 1.22 and more.