EUR/USD – BEARISH BIAS – (1.2700-1.3100).
The case for a stronger US dollar remains in place although further gains could begin to prove more difficult in the near-term. The main potential catalysts in the week ahead for EUR/USD direction will be the upcoming FOMC meeting on the 18th September, the euro area finance ministers and central bankers meeting at the end of this week, and the first TLTRO which is scheduled for the 18th September.
Speculation is increasing that the Fed may present a less dovish monetary policy outlook at next week’s FOMC meeting by potentially softening their forward guidance that rates will remain low for a “considerable” period after QE ends. Any change in guidance could prompt US short-term yields to adjust higher reinforcing US dollar upward momentum. The Fed’s updated economic projections are likely to remain largely unchanged.
Investors will also be closely watching for any developments at the upcoming euro area finance ministers and central bankers meeting at which measures to help support economic growth in the euro-zone are likely to be discussed. It follows the call from ECB President Draghi at Jackson Hole for more co-ordinated and flexible fiscal policy alongside loose monetary policy and structural economic reforms to help boost economic growth. Investors will also be watching closely to see the take up at the ECB’s first TLRO which may impact on euro direction in the near-term.
BTMU