The EURUSD pair had a very strong week and it managed to close the week quite strong as well, which was also important considering that the bulls would have liked this kind of close to ensure that they keep the run going. We have been mentioning in our last few forecasts that the pair has been performing well despite the strength in the dollar and in the week before last, despite the overall dollar strength and the fact that the dollar closed higher against almost all the currencies, the euro had managed to hold its own and we saw a follow up of that in the last week as the pair closed well above 1.0700 to end the week.
Euro Strengthens as Fed Disappoints
The EURUSD pair was helped in its upmove by the general weakness seen in the dollar across the board. The dollar weakened following the FOMC rate hike and the statement. The Fed chose to hike rates but this was widely expected in the markets and hence did not have much of an impact on the dollar prices. But what surprised the markets was the tone that the Fed chose to adopt in its statement. The markets had been expecting a very hawkish statement with specific guidelines on how the economy is performing and also specific timelines for the next rate hike but none of this information was given in the statement.
This disappointed the markets which sold off the dollar across the board and this helped the EURUSD pair to move from the low 1.0600s to above 1.0700 where it closed for the week. It should be interesting to see where the pair moves in the upcoming week as the pair looks very bullish but we believe that this move is just a continuation of the range between 1.05 and 1.08 and we expect the price region around 1.08 to hold the move for now.
It should also be noted that overall, the Fed announcement was a dollar positive in the medium and long term as they did hike rates and this paves the way for atleast 2 more hikes this year. So, we believe that it is only a matter of time before the dollar buying returns.
Looking ahead to the coming week, except for a speech from Yellen, we do not have any major news from the US or the Eurozone. So, we expect the effects of this week to carry over to the next week as well and we believe that the region around 1.08 will hold the upmove and cause the EURUSD pair to correct back towards its range from there.