EUR/USD: Best week for the euro since November

The EUR/USD was rising modestly on Friday, consolidating weekly gains. The euro managed to fully recover from the losses that followed the European Central Bank meeting last week. 

To dovish bias of the ECB meeting triggered a decline of the euro across the board. EUR/USD bottomed at 1.1175, the lowest since June 2017. The day after the meeting, following the NFP report the US dollar started to correct lower and over the current week extended the decline. 

The US dollar fell in five out of the last six trading days in the market, making a significant reversal, amid a sharp decline in US yields. The weaker greenback pushed EUR/USD to the upside that was also helped by the rally in the Sterling. Today it hit at 1.1345 a 2-week high and then pulled back modestly. Near the end of the day was hovering around 1.1315/20, almost a hundred pips above the level it had a week ago and far from the monthly lows. 

The pair rose back above the key 1.1300 area, removing some negative technical signals. Still, the main trends continue to point to the downside. While the US dollar was rejected from levels under 1.1200, the upside remains limited below 1.1400. 

Week Ahead 

Next week will be the FOMC meeting. “Keeping in accordance with its most recent communications, which emphasized the central bank’s wait-and-see approach, the Fed will stay on the sidelines this time. The newest version of the dot plot, for its part, should show participants lowering their rate hikes expectations for 2019 from two to one”, said analysts at National Bank of Canada.

Regarding economic reports, the most important will the PMIs in the US and the Eurozone. In Europe, Brexit and the EU summit (Thursday-Friday) will continue to be on focus. In the case of a deterioration in market sentiment, the US dollar could strengthen.