EUR/USD dropped sharply on Friday and finished the week lower. Signals that a rate hike during September was still possible boosted the US dollar across the board and pushed the pair sharply lower.
After the initial reaction to Janet Yellen speech EUR/USD rose to test August highs reaching 1.1340, but then it turned to the downside, falling more than 150 pips from the highs. It bottomed at 1.1179, the lowest level in almost two weeks.
Near the end of the week is still trading below 1.1200 but moving slowly away from the lows. The sharp decline changed the short-term tone from bullish to bearish.
On the weekly chart, price has fallen back below the 20-SMA that stands around 1.1210. Last week it managed to rise above that average for the first time since June.
Week ahead
At the beginning of the week, market will continue to digests Fed talk. After the Jackson Hole symposium attention in the US will turn to employment data, with the ADP report on Wednesday and the NFP on Friday. In the Eurozone, inflation data will be released.
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