EUR/USD Fundamental Analysis – week of February 20, 2017

There was some good volatility in the EURUSD pair over the last week as the first part of the week was dominated by the strength of the dollar but almost the entire move was reversed during the second part of the week. We expect the pair to now consolidate with a bullish bias for the coming week with the top likely to hold around 1.0800 and the bottom likely to hold within the range at 1.0500. We are entering into the second half of the month when the economic news generally dries up in almost all parts of the world and so the moves are then dominated by existing trends and currency flows.

Last week began with a bout of good dollar strength and for a couple of days it looked as if the much awaited dollar uptrend had finally arrived as the EURUSD pair crashed through 1.0600 and then made some steady progress towards 1.0500 and it looked as if the pair would break through 1.0500 and head even further down. This move was further helped by Yellen confirming that there are a further rate hikes ahead and also that there could be one as early as March. But this bout of dollar strength reversed during the middle of the week as the CPI data came out. Though the overall CPI data was strong, the average wage earnings showed a large drop which confirmed a similar weakness in the average wages which was released a couple of weeks back along with the NFP. This was not liked by the dollar bulls and the dollar rally quickly fizzled out and the pair ended the week just above 1.0600.

Looking ahead to the coming week, we have a holiday in the US on Monday while there is not much news from the Eurozone or the US for the rest of the week as well. So, we can be looking at some more consolidation and ranging in the pair for the upcoming week.