Markets await Yellen

Markets await Yellen 
It has been a quiet start to the week, but the markets should pick up with Fed Chair Yellen’s semi-annual testimony before Congress. While the Feds have been taking a back seat of late to Fiscal and Tax banter,  Dr Yellen returns to the spotlight this evening, and as usual, the market is sitting on pins and needles.
While there is tremendous uncertainty over the new US administration policies, I expect her to hold the FOMC cards close to the chest and to avoid any explicit jawbone to a March rate hike. Guidance will be sufficient to tighten up market interest rate expectations, and we could see the dollar punch higher.
Australian Dollar 
The AUD was a bit of a drifter overnight as any upward momentum was sapped by concerns of a hawkish Yellen testimony. The stronger US tempered base and precious metals prices, and despite another bump in iron ore prices, interest remained muted ahead of Dr Yellen’s appearance.
Overall, price action is very much reflective of last week’s neutral RBA. The current technical trading edges remain very much intact. There is strong resistance between 77- 7750, while the .7500 offers major support.
New Zealand Dollar 
The NZD, on the other hand, continued to roll over after the RBNZ statements last week, and all but wrong-footed traders with a neutral interest rate outlook.
Japanese Yen
Market optimism over the Trump-Abe talks continues to hold, but the lack of a convincing follow-through above saw profit taking quickly out of the market. The feel-good factor remains intact, with the market leaning for a hawkish Dr Yellen. Dollar dips should remain well supported today.
Chinese Yuan
Yuan tracked the JPY lower, undermined by concerns about a hawkish Yellen speech and US tax reform. Risk points lower for the Yuan as the markets reprice US tax reform.
Expect external drivers to be the dominant force ahead of China’s annual parliamentary session in March. Mainland policymakers seldom if ever rock the boat ahead of major events. PBOC has resumed open market operations.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Senior Currency Trader and Analyst at OANDA
Stephen has over 25 years of experience in the financial markets and specializes in Asian currencies at OANDA. After having started his trading career with NatWest Bank, he is currently based in Singapore as a Senior Currency Trader and Analyst with OANDA, focusing on the movement of the Aussie Dollar and ASEAN Currencies. Stephen has an extensive trading experience in Interest Rate Futures, Money Markets and Precious Metals. Prior to joining OANDA, he worked with organizations like Cambridge Mercantile, Nat West, Garvin Guy Butler, Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes
Stephen Innes

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