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Colin First

It was a week when there was little sign of any kind of reversal in the EURUSD pair and the pair continued to move higher and looks good for more. The correction during the week before that had led to beliefs that the dollar would slowly begin to recover its strength and this might lead to a larger correction in the pair and probably a full blown reversal but none of that turned out to be true as the dollar traded weakly all across the board.

EURUSD Continues Higher on ECB Cues

The focus for the week was clearly on the euro as the ECB minimum bid rate and the following press conference dominated the attention of the market and this led to some choppy and consolidation kind of trading during the first half of the week. The EURUSD pair traded on either side of 1.19 as the dollar strength waxed and waned during the week but it was clear that the pair was waiting for the ECB and that there would not be much action till that event got underway.

EURUSD Dailyeur/

The ECB kept the rates on hold and Draghi made it clear that the rates would be the same for the foreseeable future. He tried to sound partly dovish and partly hawkish as he could not deny the improving economic factors. He said that the QE would expand in length and breadth as long as it was needed but the market was not going to have any of it. It seemed as though the market had made up its mind to buy the euro irrespective of what Draghi said and the pair shot higher following the press conference as it went through 1.20 and briefly threatened a breakout through the highs of the range but it ended the week lower than the range highs but above 1.20.

Looking ahead to the coming week, we do not have any major news from the Eurozone but we have the PPI and the CPI data from the US which should tell us about the inflation in the US and give us a hint of when the next rate hike from the Fed would be. With the pair closing the week above 1.20, we believe that the uptrend is still intact but the moves could be much slower than usual as the ECB is clearly uncomfortable with the euro being at these levels and the traders seem to be biding their time for a turnaround in the dollar strength. So, in the coming week, we could see the EURUSD make its way towards the 1.21 and then 1.22 region provided the US data is not too strong. Else, we could see the pair correct towards 1.18.

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