EUR/USD Daily Fundamental Forecast – August 25, 2017

The markets have been coiling into tight ranges ahead of the speeches from Jackson Hole and the EURUSD has been no exception as it has been restricted into a very tight range over the past 24 hours and all this points to a lot of volatility later in the day as Yellen and Draghi follow up with speeches on the sidelines of the meeting. This is the event that the market has been waiting for since the beginning of the week.

EURUSD Awaits Jackson Hole

The EURUSD pair has been moving freely on either side of 1.18 since the beginning of the week with no specific direction and all of these moves since the beginning of the week do not have any significance as things come to a head today with Yellen and Draghi speaking. Yellen is expected to underpin the dollar and this is likely to place the dollar under pressure. But the more important speech, as far as the market is concerned, is likely to come from Draghi.

The market is split basically on whether he is going to be hawkish or dovish. One set of the market believes that he will specify some major policy changes and give another hint at QE tapering while another set of the market believes that he will be neutral and not specify any major policy changes and there is the set of the market which believes that Draghi will choose the middle line. It is this uncertainty that has been dogging the pair since the beginning of the week and things will become clear only after his speech which will then lead to a lot of volatility.

Looking ahead to the rest of the day, we expect the market to continue within a tight range in the Asian and London sessions while volatility should pick up during the US session with the speech of Yellen followed by the speech from Draghi a few hours later during that session.