EUR/USD Monthly Forecast – September 2017

The EURUSD pair had a choppy month of trading though the uptrend was pretty much intact in the pair. The uptrend was not as strong and clear as it was in July but this could have been due to the holiday period in some parts of the world which would have led to traders not being in their desks. But the euro did manage to have some strong bid during the course of the month but it has too be said that towards the end of the month, the pair did face some difficult times which points to some tough situation in the upcoming brothers.

EURUSD Turns Choppy

The first half of the month saw some weakness in the pair as the data from the US came in pretty much mixed. The employment reports came in very strong which helped to support the dollar and which led to a correction in the pair. Also, the ECB did not give any indication on when the QE tapering was likely to happen and this also added to the pressure on the pair which led to its correction. But the region around 1.1650 served to lend a lot of support for the price and this led to a period of consolidation and ranging in the EURUSD pair.

It was only in the second half of the month that the euro began to pick up steam. There was an escalation of global risks the tension between North Korea and the US escalated and also, the data from the US also began to taper out which increased doubts on whether the US economy was really on the path to recover. The focus was on the meeting of the Central Bank leaders at Jackson Hole, for the second half of the month, but it turned out to be a disappointed as Yellen refused to lend any support to the dollar while Draghi continued to keep mum on the strength of the euro. This was a signal for the markets to buy euro and sell the dollar and this led to the pair to push through 1.2000 for a brief while before some correction set in.

ECB Doesnt Like Euro to get Too Strong

Looking ahead to September, we are reaching a stage when the ECB is going to be really concerned about the strength of the euro and would begin to look at tapering the strength somehow. The Fed seems to be pretty happy with the weakness in the dollar and it seems to have become a policy of the Fed to allow the dollar to be at the mercy of the incoming data and the markets. But for the ECB, they cannot afford the euro to continue to strengthen as this is likely to affect the eurozone economy seriously.

The euro has been rising on the expectation that the ECB would being tapering pretty soon but the ECB would want to postpone the tapering exactly for this reason. We might hear some jawboning from the ECB leadership to keep the euro under control and they would also hope that the incoming data from the US would start getting better so that they get some weakness in the EURUSD pair and hence some breathing space over the coming month.

EURUSD Likely to Consolidate for Some Time

We are also going to see elections in Germany during the upcoming month which is likely to have an impact on the euro. Though it is a clear lead for Merkel at this point of time, it is well known that nothing is certain in politics and so the market might await the elections results in a tense manner. Also, with the rate hike from the US also getting delayed, probably to the next year, we are likely to see the dollar on the backfoot irrespective of how the incoming data from the US comes in. September might be a volatile month, with the end of the holiday period, and we might see some strong correction in the EURUSD pair in the upcoming month as the ECB might try its best to keep the euro under control.

Technically, the pair now has a fixed and tough ceiling in the 1.2070 price region and it is going to take a lot of effort and some major fundamental change to happen for the pair to break through this region again. We need to probably see the data from the US continuing to stay weak and the ECB continuing to ignore the euro strength for anything of this sort to happen. On the lower side, we are going to see the support coming in at 1.1660 region, as we saw during the month of August. A breakout on either side is likely to lead to atleast a 300 pips move on either side and hence the traders should get ready to trade the range as well as the breakout during the course of the upcoming month.