EUR/USD Weekly Analysis – May 8, 2017
We had mentioned in our forecast last weekend that the euro was getting stronger and stronger and despite the fact that the dollar was generally steady across the board, it can do little against the advancing euro and with that in mind, we said that it was only a matter of time before the EURUSD pair made a move towards 1.10 and thats what we saw last week as the pair made slow but steady progress to achieve the target of 1.10 by the end of the week.
EURUSD Moves Higher Steadily
The pair closed the week at the highs and this was mainly in anticipation of the run off in the French Presidential elections where the business and euro friendly Macron is expected to win it pretty easily, which will help to strengthen and bolster the eurozone. This is in contrast to the move 2 weeks back where the markets were uncertain on who would win the first round of the elections and this was evident in the way the EURUSD pair was chopping around, with no specific direction.
This time, the direction is very clear and it has been further helped by the weaker dollar across the board. The dollar strengthened a bit during the middle of the weak on strong non-manufacturing PMI data and also some strong ADP numbers but the dollar was let down by the weak wages report that was released along with the NFP report on Friday. There has been a realisation that along with the NFP, another piece of important data is the wages report which tells the number of hours of employment and the billing per hour which actually reflects the quality of the employment and not just the number of people being employed. This is the true sense of the strength of the economy and with the wages coming in weaker again, the dollar was on the backfoot and this helped the EURUSD to climb towards 1.10.
Looking ahead at the coming week, we still have the French election run off happening as of now with the results expected within the next 24 hours. A confirmed victory for Macron could push the EURUSD even further. We also have the retail sales, CPI and PPI data from the US in the coming week. A clean break through 1.10 should target 1.1120 in the short term.