The EURUSD pair continued to make some strong progress last week but it is beginning to become clear that the fuel in the move is becoming lesser and lesser and we may be in for a deep correction pretty soon. The move up has become slower than normal and we are also seeing the corrections happening much more frequently. Also, these corrections also seem to be much deeper than they are usually, all of which point to a weakening trend.
EURUSD Slows Down
On the other hand, we also realise that the ECB would be very wary of the euro going much higher as this would start affecting the economic data like inflation and throw a spanner in their works. So, they would want to do something to control the euro and at the same time, the Fed would also become increasingly conscious of a weak dollar and would also want to do something about it. All of this points to a situation where we could see the trend come to a slow close and then we should see a much deeper correction at that point of time.
Last week, we got reports on the failure of the Trump team to push through changes to the healthcare reform bill which now basically buries the bill for good. We also got the FOMC minutes which did touch upon the monetary policy and the balance sheet but did not have anything that is likely to support the dollar too much. Both these events put the dollar clearly on the backfoot and though it did try and manage a small recovery on the back of stronger data towards the end of the week, the EURUSD pair still managed to close the week on its highs.
In the upcoming week, we have a slew of data as it is the first week of the new month. We have the ADP employment change, the PMI data and also the NFP from the US. The dollar bulls would hope that the data would begin to get stronger and prove that the data over the last 2 months was only a blip on the screen. If the data does come in stronger, then we could see the correction in the EURUSD pair that we expect to happen anytime now.
This article was originally posted on FX Empire