EUR/USD Fundamental Analysis – week of May 22, 2017

The pair continued to move higher to cap off a great week for the euro bulls. Just 2-3 weeks back, the EURUSD pair was struggling in the 1.06 region and the traders, analysts and investors were thinking about when it would be break the 1.0 region but now, in a matter of a couple of weeks, we are seeing the pair in the 1.12 region and looking good for more.

EURUSD Rockets Higher on Dollar Woes

As we had mentioned a few times over the last couple of weeks, most of the moves since the beginning of the year had been dominated by the dollar alone and there was enough headlines associated with the dollar with reports of Fed hiking rates and with Trump and his tweets that the traders were kept busy and on their toes by alternating periods of strength and weakness in the dollar. But it is during this month, that we are seeing the euro strength also shining through and a combination of euro strength and dollar weakness has made this rally possible.

The Euro has been rising ever since it got the French elections out of the way and with the French people choosing to elect a pro business and pro economy President, the world order has been restored, as far as the market was concerned and this gave the euro a huge boost. At the same time, we have seen the woes of Trump and his team continue to compound over the last week with reports of him having leaked sensitive info to the Russians and with a memo being brought in saying that he interfered with an investigation. This put pressure on the dollar and we got hints that the June rate hike from the Fed, which the market had expected, may not happen after all. This has led to the unwinding of dollar longs over the last week and this has helped the EURUSD pair to finish the week strongly above 1.12.

In the coming week, we have Draghi speaking and we also have the German Ifo Business Climate and we also have the FOMC meeting minutes and the Prelim GDP from the US. These should ensure that there is enough volatility in the markets but we believe that the uptrend in EURUSD is here to stay and we have atleast 200 more pips to go.