EUR/USD Fundamental Forecast – February 11, 2016

Analysis and Recommendations:

The EUR/USD was under pressure most of the session, closing at 1.1259, down .0033, or -0.29%. Trader indecision and position-squaring ahead of Fed Chair Janet Yellen’s testimony before Congress was behind most of the weakness and the limited price action.

With today’s testimony, investors will be looking for clues regarding the timing of another rate hike, this event could be a market-mover, so traders should be prepared for better-than-average volatility and volume throughout the session.

Traders should expect to see Yellen take on some pointed questions from the members of the House Committee on Financial Services at 10:00 a.m. ET on Wednesday. Her comments will be released at 8:30 a.m. ET. After raising interest rates in December for the first time since 2006, the Fed remained on the sidelines in January, but issued a dovish monetary policy statement. This move reflected a softening in U.S. economic growth.

Yellen’s testimony will help investors decide if a March rate hike is still on the table, or if the first rate hike in 2016 has been moved to June, September or beyond. Traders want clarity and conviction from Yellen, however, she may deliver the company line, “a rate hike will be data dependent”. The Euro is likely to pick up strength if Yellen’s responses are confusing to investors.

If Yellen paints a pessimistic picture of the economy, the EUR/USD could also post strong gains. Just a couple of months ago, the Fed was hinting at the possibility of a series of rate hikes in 2016, but these plans have drastically changed since the first of the year, with many experts openly questioning if the central bank will make any more moves before next year.

Look for the EUR/USD to strengthen if Yellen comes off as unclear about the intentions of the Fed and is pessimistic about the economy. Look for the EUR/USD to break if Yellen talks about the economy and the timing of futures rate hikes with clarity and conviction.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

Today’s economic releases:

Upcoming Economic Events that you should be monitoring: 

Thursday, February 11, 2016

 Government Bond Auctions

Date Time and Country

Feb 11 N/A Italy Euro 4-5bn 30-yr syndicated bond auction

Feb 11 11:03 Sweden Holds I/L bond auction

Feb 11 11:10 Italy Announces details of bond auction

Feb 11 11:30 UK 3.5% 2045 Gilt auction

Feb 11 19:00 US Holds 30-year bond auction

Feb 11 n/a US Details of 30-yr TIPS auction on Feb 18

Feb 12 11:10 France Details of bond auction on 18 Feb