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EUR/USD Fundamental Analysis – week of March 13, 2017

By:
Colin First
Published: Mar 11, 2017, 05:31 UTC

EURUSD has shown some remarkable resilience over the last week despite the strength of the dollar. The dollar has managed to gain against almost all the

EUR/USD

EURUSD has shown some remarkable resilience over the last week despite the strength of the dollar. The dollar has managed to gain against almost all the other currencies and the commodities over the last week as the rate hike for next week is more or less confirmed due to the strong employment reports that we have seen over the last week. But, the dollar has failed to make any progress against the euro and the euro has stood tall amongst the ruins generated by the dollar.

Euro Shows Strength

The strength of the euro was severely tested during the early part of the week as the dollar rose in anticipation of a good employment report later on in the week and also a possible rate hike heading into the FOMC in the middle of the month. This pushed the EURUSD pair lower and then we got the ADP employment report that was released in the middle of the week and that came in at a little 50% more than the expected value. This cheered the dollar bulls even further and pushed the EURUSD towards the strong support region around 1.0500.

But thats as far as the dollar bulls got as the pair then rebounded over the next 2 days, first due to the hawkish ECB which made it clear, during its press conference, that the eurozone was comfortably on its way to achieving its economic targets. This brought in some cheer to the euro camp and there began its recovery as the EURUSD pair pushed towards 1.0600.

EURUSD Weekly
EURUSD Weekly

Then we got the NFP and though it came in at a stronger than expected value, which confirmed the rate hike next week, the traders chose to focus on the hourly earnings which came in slightly weaker, and they sold the dollar. This was a surprise and showed that the dollar bulls were exhausted and had already priced in a strong employment report and a rate hike next week. This did not reflect the fundamentals but reflected more on the pricing and profit taking activities of the markets in general. This helped to push the EURUSD higher and higher and it managed to go as high as 1.0680.

In the coming week, we have a range of news with PPI, CPI and Retail sales data from the US but the focus will be on the FOMC rate announcement and statement. With the hike priced in, the focus will be on the statement and the market would expect the Fed to be very hawkish. But if the Fed chooses to hike rates and sound neutral, then we might see a round of profit taking in the dollar which should push the EURUSD further higher.

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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