Good day forex traders.
Welcome to the weekly review of the EUR/USD currency pair. Did you have a good week of forex trading?
In our previous EUR/USD forecast we noted on the possibility of a bearish decent to 1.06 should the current region failed. We were also reviewing on the various reasons possible for a strengthening US dollar.
Looking at the EUR/USD weekly chart above, we note that the 1.06 target was hit. One reader wrote in to share his joy and you are most welcome :).
The depth of the dip suggests a sentimental reaction as to the reason of the drop. We need to be careful as sentiments may be fickle at times.
A recovery back to the 1.08 region may be possible should the market settle down. If the post Trump sentiments persist, 1.04 could be next.
From a fundamental point of view, the US interest rate hike may still proceed as economic data remains encouraging. BBC reports,” The chair of the US Federal Reserve, Janet Yellen, has indicated that it could raise interest rates “relatively soon”.
She said the job market had made further improvements this year and that inflation, while still below the Fed’s 2% target, had started to pick up.
Financial markets are expecting the Fed to take action at a meeting next month.
She also defended the independence of central banks after criticism of the Fed by President-elect Donald Trump.
Ms Yellen’s comments came in an appearance before a Congressional Committee on Thursday.
It would be only the second rate rise since the bank pushed rates to a record low during the financial crisis.
In December last year, the Fed raised its benchmark rate for the first time in seven years, from near zero to its current level of between 0.25% and 0.5%. ”
If the above scenario happens, we may see a more resistant US dollar value due to increased demand. Having said so, US equities may face increased challenges due to the tightening of monetary conditions.
Next week may bring about more EUR/USD activities as numerous economic data are due to be released. This includes the German Ifo Business Climate. We know that Germany being the largest economic member of the EU, often commands significant influence on the EUR/USD.