EUR/USD Fundamental Analysis – week of February 27, 2017

EURUSD closed lower for the week as the dollar strength continued to increase and decrease with each passing day and with no sense of direction or trend. This is indeed a surprise for the dollar bulls who had been expecting  strong uptrend in the currency ever since the beginning of the year but the dollar has failed to string together a sequence of even 3-4 days in a specific trend as it has been dominated by choppiness.

EURUSD Seems Lost

Last week, we saw the release of the FOMC meeting minutes and with many of the Fed members advocating for a rate hike as early as March, the market was expecting a very hawkish minutes. But what it got was a minutes that rode the middle line and also a non-committal one as it said that the Fed was looking for a rate hike as soon as possible. This could mean that the rate hike is possible from anytime between March and May and this kind of uncertainty disappointed the markets.

The minutes was followed by contradicting statements from some of the Fed members and this only served to increase the confusion in the markets as the dollar weakened across the board and the EURUSD pair traded above 1.0600 for a brief while as a result. But towards the end of the week, the dollar strength faded as we approach the week and the month end and the pair now trades just above 1.0550 to close the week and looks like it is in a consolidation phase.

Looking ahead to the coming week, it is a week that is going to see the end of a month and a beginning of a new one and hence the traders should be prepared for some month end currency flows. We also have a range of data from the US including the GDP, core durable goods and unemployment claims data and also a speech from Yellen and so the market should not be short of volatility. We expect the region around 1.07 and 1.04 to hold the range in this pair for now.