US Dollar Bulls Gored by Dovish Yellen, EUR/USD Surges
- EURUSD breaks into pre-ECB range above 1.3585, topside at 1.3675.
- British Pound still looks like 'best house on a bad street.'
- See the DailyFX Economic Calendar for today's USD-related events.
There was sufficient evidence to believe that, even though US economic data has been slumping of recent, if the Federal Reserve came out with optimistic enough June economic projections, the US Dollar could rally. Instead of the running of the bulls starting a month early, Fed Chair Janet Yellen came out and gored US Dollar bulls.
While volatility came back to life momentarily - EURUSD traded in a 51-pip range in the 10-minutes following the release of the June projections and the policy statement - the tone for US Dollar weakness wasn't really set until Chair Yellen hammered home the idea that there was no technical mechanism in place to determine when interest rates would rise.
This is a significant dovish shift, irrespective of the slightly more optimistic Fed economic projections. Several months earlier, Chair Yellen suggested that the first rate hikes would come six months after QE3 ended; saying that there is no set timetable and that there is significant uncertainty around the path of economy walks back any clear horizon for a tighter Fed monetary policy.
The US Dollar has taken a significant beating in the hours since Chair Yellen's remarks, and has broken down through significant levels versus the British Pound and the Euro. Perhaps most interesting is USDJPY right now as it flirts with the 'BoJ trendline' from April 2013. See the video above for the technical outlooks, and click the link below for rationale on buying the British Pound.
--- Written by Christopher Vecchio, Currency Analyst
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