The EUR/USD pair attempted a bullish move but could not go far, given the dominance of a dovish tone. However, a German survey and a final inflation numbers will be highlighted during the week ahead.
The European Central Bank (ECB) has left all policy measures on hold and declined to give any details relative to changes on the span or the mechanics of the QE program.
Draghi’s message was still taken as dovish despite the dearth of details, which sent the euro to remain flat and came in a week after the dollar was seen dropping at a disappointing result.
Stance of the Week Ahead
The currency pair continued a range-bound movement as it remained fairly balanced.
As the current account surplus and banks heightened that are constrained financially to hedge their forex is likely providing an underlying support for the euro.
Meanwhile, it appears that the ECB’s lack of urgency to introduce fresh EUR-negative policies have helped lift the currency, despite Draghi’s deflation warning that intervened the strengthening euro.
The dollar has seen soaring at the end of last week after Fed officials appealed for a September rate hike, led by Boston Fed president Eric Rosengren.
Thus, it has combined the intensified geopolitical tensions emerging from rogue state North Korea, along with the nuclear testing programme that ramps up, which sent US equities to significantly drop by 2.0% despite a strengthening dollar.
It has therefore sent the currency pair to decline, offsetting its earlier gains after the dollar rallied from an increased safe-haven demand and Fed hike bets.
The chart below illustrates the movement of the EUR/USD pair since Britain’s referendum begun. Here are the details of its every movement:
· The EUR/USD pair started to wobble on June 24 and significantly declined, touching three lines and last down at support 1.11086 after the market sentiment has changed, led by the British European Union referendum.
· The pair continued to struggle on July 4 – 8 in the post-brexit week, but did not go too far, as the several PMIs data release and ECB meeting were postponed and are being watched for further details.
· On July 18 – 22, the currency pair edged higher and the market has tried to get back to normal.
· A softer than expected US GDP report was released and sent the EUR/USD to consolidate on August 1 – 5.
· Meanwhile, it showed a bullish trend in the wake of FOMC minutes on August 18, despite a hawkish tone, suggesting the Fed will likely proceed with a rate hike in the near future.
· The economic sentiment has improved, but remained fairly balanced as concerns over brexit is still lurking.
It appears that the ECB is far from claiming its objectives and keeping the euro struggling could send the pair to a higher inflation.
Responding now could not be more ideal, but expecting a potential move could serve to tilt euro down, in spite of the unclear timing of the Fed with a rate hike decision.
However, the EUR/USD pair outlook remained evenly balanced, but our studies suggest that the pair is prone to a slight downside bias.
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