EUR/USD Fundamental Analysis – week of November 20, 2017

The euro has ended what turned to be a very strong and volatile week, off its highs. The week before had been marked by lethargy in the markets which led to low volatility. The traders did not know which way to push the euro and the dollar in and the lack of fundamentals and economic news was telling. But the pair managed to finish the previous week near its highs and that pointed to more gains the following week and thats what we saw during the course of the last week.

EURUSD Moves to Top of Range

The first half of the week was marked by weakness in the dollar as the Fed members continue to waver with regard to the rate hike in December. Several Fed members gave their views on the rate hike and they stuck to their guns with the hawks being hawks and the doves continuing to be doves. This only made the picture even more murky in the medium term and the dollar took a beating. Then came along the inflation and retail sales data in the middle of the week and to the relief of the dollar bulls, both the pieces of data came in pretty steady.

The incoming data from the US has been quite choppy over the last couple of months and hence even some data that just about met expectations was looked upon as a victory for the dollar bulls. In our view, we believe that the data is now enough to warrant a rate hike from the Fed in December but the market seems to not be convinced about it as yet and that is why we saw some choppy trading in the EURUSD which made the pair close the week off its highs.

Looking ahead to the upcoming week, we have speeches from Draghi and Yellen but the more important event would be the release of the FOMC meeting minutes in the middle of the week. The market would be looking for hints for the upcoming rate hike and if the minutes turn out to be hawkish we can continue to see some more dollar buying in the upcoming week which should bring 1.17 and 1.16 into the picture.