EUR/USD Fundamental Analysis – week of November 27, 2017

Colin First

Updated Fri, Nov 24, 2017, 8:33 PM

The EURUSD pair ended the week on a very strong note as a combination of holidays in the US and the dovishness in the FOMC meeting minutes helped to weaken the dollar to a great extent ,during the course of the week. This was fully utilised by the euro bulls to push the prices higher through some strong resistance regions and it is likely that the bulls would push even higher during the coming week and try to break through the 1.20 region during this period.

EURUSD Breaks Higher

The week began quietly for the euro but the underlying strength in the currency was there for everyone to see. It was clear that the traders were waiting for the FOMC minutes later in the week to see what the Fed members think about the future rate hikes in the US. This helped to keep the pair within the range during the early half of the week. Then came along the FOMC minutes during the middle of the week where it confirmed that there would be a rate hike in the US in December. But this was already almost fully priced into the markets and hence the focus of the traders was on the rate hikes in 2018.

It is here that the Fed members chose to be dovish as some of the Fed members expressed concern over the inflation data and were not so sure of committing themselves to further rate hikes in 2018 and chose to wait for the incoming data. Also, with the Fed Chief Yellen moving out and being replaced by Powell, the dollar is likely to face come uncertain times as it remains to be seen what kind of a Fed Chief Powell would turn out to be. This led to a weakening of the dollar across the board and helped the EURUSD pair to break through 1.18 and move even higher. Then there was the long weekend in the US due to Thanksgiving and this led to a drying up of liquidity especially in the US session. This was well used by the bulls to push the pair through 1.19 to close the week.

Looking ahead to the coming week, the euro traders should guard against a correction that might happen once the US traders return back to their desks and find the euro too high to their liking. This could lead to some profit taking and a sell off which the traders have to take care. The calendar is a bit thin for the euro and the US with the Prelim GDP data from the US and Yellen testifying being the only events of note in the coming week. Traders should wait for confirmation of the breakout on Monday and once it is confirmed, they should look for any sort of correction in the EURUSD pair as a means of going long on this pair.

This article was originally posted on FX Empire