Week in FX Americas – Market Unfazed By Yellen Comments

What ever happened to the Yellen fallout? This week started with a limited currency range and we are ending the week on the exact same note. President Obama's Fed Chair nominee, Janet Yellen, stuck to her dovish reputation during her job interview in front of the US senate banking committee yesterday. The immediate market response to her status quo viewpoint allowed both the Dow and S&P's to close at record highs. As to be expected, the overall dollar move ever since has been rather lackluster, most likely as the markets had already being prepped for Yellen's stance in her statement that was conveniently leaked the evening before.

To carry the Bernanke baton favors riskier strategies. Risk currencies like the NOK, GBP and AUD have been outperforming, while JPY remains offered. The 'patience trade' - short yen outright - is looking to close out this week above the psychological ¥100 benchmark level. It has taken some time for the dollar to drag its way here, supported by a non-tapering Fed while the yen falls foul to the BoJ's current easing program. A bounce back in US yields and a near +2% rally in the Nikkei has helped the dollar retain the ¥100 handle. The downward momentum for the yen should be maintained, especially since the Japanese Finance Minister Taro Aso indicated that Abe's government would push back against a strengthening of the currency.

Following Janet Yellen’s relatively uneventful testimony, the 'mighty' dollar bulls are confident that they remain in control. Currently, there are no other reasons to suggest otherwise. Dealers and investors will be expecting any near-term pullback in the USD to provide a good opportunity to add to any 'long' dollar positions at better levels.

WEEK AHEAD

* EUR German ZEW Survey (Economic Sentiment)
* USD Advance Retail Sales
* USD Consumer Price Index
* USD Fed Releases FOMC Minutes
* JPY Bank of Japan Rate Decision
* CAD Consumer Price Index

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Dean Popplewell

Dean Popplewell

Vice-President of Currency Analysis and Research at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell