EUR/USD Weekly Fundamental Analysis, August 24 – August 28, 2015 Forecast

Weekly Analysis and Recommendations:

After early weakness on Monday and Tuesday, the EUR/USD surged the remainder of the week to its highest level in nearly two months. The rally took place amid a massive sell-off in global equity markets largely on concerns about a possible recession in China. 

The EUR/USD began its rally shortly after the U.S. Federal Reserve issued somewhat dovish minutes from its July meeting. The minutes suggested that persistent weakness in the economy could prompt a delay in an interest rate hike by the Fed in September. The extreme sell-off in the equity markets, fueled by weaker-than-expected manufacturing data from China, also raised doubts for an early rate hike. 

The EUR/USD could continue to rise this week if the stock market weakness continues. If stock market volatility returns to normal or if there is a short-covering rally then look for profit-taking by Euro buyers who caught last week’s surge. Traders will also take a closer look at traditional economic reports. From the U.S., these include durable goods, preliminary GDP, home sales and consumer confidence. The Euro Zone will feature the German Ifo Business Climate report and CPI data from Germany and Spain. 

The main trend is now up as well as momentum, however, much of last week’s rally was driven by the volatility created by the massive stock market sell-off. Volatility gives and it takes away so if the stock markets remain relatively calm then look for profit-taking to drive the EUR/USD lower. The selling pressure should not be enough to turn the trend back to down because there are enough investors out there to support the Euro on the belief that the Fed will refrain from a September interest rate hike. 

This current rally doesn’t mean that investors believe the Euro Zone economy is better than the U.S. economy, but it reflects the massive amount of shorts who were betting on an early rate hike by the Fed. The price action suggests that the odds of this event happening are probably 50/50 or lower at this time. 

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports. 

Reports to Watch This Week: 

         Date                Time            Curr                             Event                                                                          Forecast  Previous