EUR/USD Weekly Fundamental Analysis, October 6 – October 10, 2014 Forecast

The EUR/USD continued its slide last week, reaching its lowest level since August 2012. Although technically the Forex pair is oversold and ripe for a short-covering rally, this is likely to be short-lived because the longer-term fundamentals are overwhelmingly bearish. The major players will likely be waiting to re-short on any meaningful rally.

Although the EUR/USD weakened to a 26 month low last week, at times there were signs of bottoming action. The Euro actually did firm against the dollar, following the European Central Bank monetary policy announcement on October 2. The fact that the ECB did not suggest that any type of quantitative easing program was on the horizon was the primary reason behind the mild strength.

In his post-meeting press conference, ECB President Mario Draghi emphasized that the central bank’s main goal is to maintain the inflation rate at nearly 2 percent and that the ECB’s balance sheet is simply an instrument.

Traders had initially priced in additional quantitative easing, but Draghi stated that the ECB would continue with its current policies aimed at expanding credit.

Combining the technically oversold conditions with the light economic calendar this week and Draghi’s less-hawkish comments last week, traders may try to trigger a short-covering rally.

High Impact Economic Events That Traders Should Be Aware Of This Coming Week

Currency         Event                                                                      Forecast                           Previous

Monday, October 6

There are on high impact economic events today.

Tuesday, October 7

There are on high impact economic events today.

Wednesday, October 8         

USD                FOMC Meeting Minutes

Thursday, October 9

USD                Unemployment Claims                                          291K                                   287K             

EUR                ECB President Draghi Speaks

Friday, October 10

There are on high impact economic events today.