EUR/USD Fundamental Analysis – week of May 29, 2017

The EURUSD pair closed near the lows of its range for the week as the dollar managed to gain back some of the strength that it had lost in the week before. In the previous week, we had seen the dollar take a hit on the back of the political troubles faced by Trump and there was also a talk that this could affect the proposed rate hike from the Fed in June. But 1 week is a long time in the markets and in the political circles and we saw that last week as the dollar gained some strength on renewed hopes that there could be a rate hike in June.

EURUSD Corrects in Week of Tight Ranging

This notion was strengthened by the FOMC minutes which, though not as hawkish as the market had expected and not as optimistic about the economy, still kept the door open for a rate hike in June provided the incoming data was good. Also, we saw some of the Fed members also make speeches that they would prefer to see a rate hike in June and all this helped to support the dollar and it managed to progress against the euro though the weekly range was one of the lowest that we have seen over the past year. The euro also continues to trade strongly and steadily and that is why we have seen that the dollar has not progressed that much against the euro as against the others.

We also had Merkel say that she is worried about the weak euro and blamed the ECB for keeping it weak and this helped to support the euro along with the fact that the incoming data from the Eurozone has been positive over the last few months. So, though the EURUSD pair closed near its lows for the week, it was a week of tight range and so we still believe that the euro would be able to withstand this pressure from the dollar in the short and medium term.

Looking ahead to the coming week, it is a week which sees the end of a month and the beginning of a new one and so the first half is basically bare in terms of economic data while the later half is filled with economic data culminating in the NFP on Friday. With the Fed making it clear that the rate hike would depend on incoming data, the coming week is likely to see a lot of volatility especially in the second half. Traders would be well advised to stick to strong areas of buying if they plan to go long on EURUSD.