Federal Reserve Chair Janet Yellen is set to speak at the University of Michigan at 4:10PM ET (20:10GMT) on Monday. Audience questions are expected. Her comments will be monitored closely for any new insight on policy and the timing of when the Fed will next raise interest rates.The Fed chair could be asked about the U.S. central bank's plan to start shrinking its massive balance sheet, which ballooned to $4.5 trillion in wake of the financial crisis.The Fed has not yet offered details on how it would reduce its holdings of Treasurys and mortgages but said it would like to start later this year.Another topic of interest will be the Fed's concern that the stock market may be overvalued, as revealed in last week's minutes from the central bank's March policy meeting.We don’t know how the markets are going to react to this speech,we think that there might be 2 scenarios:
A:Janet Yellen begins talking about new interest hike and shows her cards.
B:Janet Yellen dodges questions about interest hikes and starts talking about limiting inflation and shrinking the balance sheet.
If scenario A takes place,expect the dollar to be bullish and if scenario B takes places expect the dollar traded pairs to be bearish.We recommend following our technical analysis for Monday(for the dollar traded pairs).
If that’s the case, the auto industry won’t rev up the economy as much as it has earlier in the economic expansion.
If the expectations meet the announced data,open long positions but be cautious ,because if the data stays the same as last month or even decreases you can open short positions .We believe that there will be an increase in inflation ,so our recommendation is to open long positions on all usd traded pairs..