EUR/USD Weekly Fundamental Analysis – January 4-8, 2016 -Forecast

Weekly Analysis and Recommendation:

The EUR/USD ended the week on the low end of its current trading range at 1.0855. The euro has dropped nearly 10% against the dollar this year, mainly due to policy divergence between the ECB and the Federal Reserve. In March, the ECB launched an aggressive bond-buying program to boost economic growth and inflation, while the Fed in December raised interest rates for the first time in almost a decade.

From a structural perspective, we think reduced and contained fiscal and current account deficits combined with a 5% unemployment rate leave the US economy and, by extension, the USD, in good shape. Lower deficits and tighter monetary policy effectively means the supply of USDs in the global financial system will become somewhat scarcer in 2016.

The USD bull trend remains well-entrenched. The US dollar (USD) will regain renewed impetus in the months ahead, fueled by growth and interest rate differentials. In addition, the USD will benefit from the structural liquidity premium provided by deep equity and debt securities. Many market participants are already heavily invested in the USD-strengthening trade

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 and we provide daily updates and outlooks.

Major Economic Events for the week:

 

Upcoming Government Bond Auctions