EUR/USD continued to breaking down as the dollar continued to gain strength
The EUR/USD has continued to take a battering as the dollar continued to gain strength across the board. With the market surprise and uncertainty over Trump and his team slowly starting to wear off, the attention has now firmly shifted towards the Fed and also the incoming economic data and see what the Fed is planning to do in the near future. We have been making it clear that once the focus begins to shift towards the Fed, it is very likely that the dollar would be the winner and that is what we have been seeing since the beginning of this week.
Yesterday, the main event was the testimony of the Fed Chief Yellen on the monetary policy and the market was watching it very closely for clues on when the next rate hike is likely to be. Yellen managed to do a good balancing act without indicating anything on the timelines involved. She did acknowledge that there are likely to be couple of more rate hikes for the year and though she did not explicitly say so, she kept the door ajar for a rate hike as soon as March. This cheered the dollar bulls to a great extent and the effect was felt all across the board. The EUR/USD crashed through 1.0600 and broke through important support at 1.0580 and it rests just below that figure as of this writing. It is likely to stay weak and hence, any bounce in this pair should be viewed as an opportunity to sell in the short term.
Upcoming Economic Events
Looking ahead to today, we have the CPI and Retail sales data from the US and we also have Part 2 of Yellen Testimony and all of this is likely to keep the euro under severe pressure with a lot of volatility guaranteed during the US session. We would expect the pair to move towards 1.04 in the short term.