EUR/USD Daily fundamental Forecast – December 14, 2016

EURUSD continues to trade in a strong manner as it bounced off the support in the 1.0500 and 1.0600, a strong support region which we have repeatedly pointed out in many of our forecasts. It remains to be seen how strong and valid the bounce would be this time and all this would be known within the end of the trading day today as the FOMC rate statement and rate hike is due later on today.

The EURUSD continued to bounce around the 1.0600 mark as the lack of much news heading into the FOMC has helped the bulls to mount a fightback. It did manage to reach as far high as 1.0662 but that was the maximum that it got due before the sellers came in and then the pair was pushed down below the 1.0650 and that’s where it trades as of this writing. Again, expect a lot of volatility later on in the day and for both the bulls and the bears, the region around 1.0550 would continue to be key. A breakdown below the 1.0460 region would signal the next leg of the bear phase which could carry the pair all the way to parity and this is what all the traders would be watching out for. This would be the level where the bulls would jump out and the bears would regain control.

Looking ahead to today, all the focus would be on the FOMC statement, rate hike and the press conference of Yellen immediately afterwards. Almost the entire market expects a rate hike today and the hike has been 100% priced in and so we are not sure what would happen and what kind of reaction we would get from the markets once the announcement is completed. The key here would be the statement where the market would be looking for clues for further hikes and the market would also be watching the press conference keenly to see if the Fed provides some hints on when the further rates hikes are expected to be. It is best to stay on the sidelines and let the dust settle and see where the market goes, before jumping in.

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