We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
Oil - US Crude
More View more
Real Time News
  • The Australian Dollar and New Zealand Dollar tend to rise with stocks. They have recently fallen despite gains in the #SP500. What does this mean for $AUDUSD and $NZDUSD ahead? #AUD #NZD #RBA #RBNZ - https://www.dailyfx.com/forex/fundamental/article/special_report/2020/01/17/AUDUSD-NZDUSD-Outlook-Looks-Past-Stocks-to-Rate-Cut-Bets.html?CHID=9&QPID=917702 https://t.co/ddf2fV7Kyl
  • A few snippets from today's commentary. Check out the link below for the full story (via @DailyFX). https://t.co/I31tuq764r https://t.co/x0BaiOFA1P
  • Have you joined @DailyFX @facebook group yet? Discuss your #forex strategies and brush up on your skills with us here: https://t.co/jtY1G7g8yx https://t.co/e2YrN3dBrl
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 98.00%, while traders in France 40 are at opposite extremes with 79.59%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/UL7hqSD2Ki
  • US Dollar Forecast: $USD Lacking Impetus Ahead of Consumer Sentiment #Forex traders shift focus away from US-China trade deal headlines - perhaps toward the monthly release of #ConsumerSentiment data for volatility and clues on the Greenback's next move https://www.dailyfx.com/forex/fundamental/us_dollar_index/usd_trading_today/2020/01/16/us-dollar-forecast-usd-lacking-impetus-ahead-of-consumer-sentiment.html
  • Forex Update: As of 05:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.11% 🇦🇺AUD: -0.02% 🇯🇵JPY: -0.03% 🇨🇭CHF: -0.05% 🇬🇧GBP: -0.06% 🇨🇦CAD: -0.07% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/Kxcb9EtIWb
  • Indices Update: As of 05:00, these are your best and worst performers based on the London trading schedule: Germany 30: 0.45% France 40: 0.26% Wall Street: 0.07% US 500: 0.00% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/I5YIsKQAog
  • 🇯🇵 JPY Tertiary Industry Index (MoM) (NOV), Actual: 1.3% Expected: 1.0% Previous: -5.2% https://www.dailyfx.com/economic-calendar#2020-01-17
  • The $JPY has weakened as a bounce-back in risk appetite saps haven-asset demand. However, the old uptrend line still provides clear resistance. Get your market update from @DavidCottleFX HERE:https://t.co/IMhgQ9jbF9 https://t.co/I7087olftk
  • Heads Up:🇯🇵 JPY Tertiary Industry Index (MoM) (NOV) due at 04:30 GMT (15min), Actual: N/A Expected: 1.0% Previous: -4.6% https://www.dailyfx.com/economic-calendar#2020-01-17
After Yellen, the US Dollar May be in Serious Trouble

After Yellen, the US Dollar May be in Serious Trouble

2016-03-30 11:55:00
Christopher Vecchio, CFA, Sr. Currency Strategist

Talking Points:

- USDOLLAR Index on precipice of larger technical breakdown.

- EUR/USD, USD/JPY near breakout points; USD/CAD, NZD/USD confirming emerging theme.

- As USD slips, retail crowd positioning is beginning to turn as well.

If the Federal Reserve's March policy meeting wasn't a big enough hint in its own right, then yesterday's speech by Fed Chair Janet Yellen should have gotten the message across loud and clear: the Fed's rate liftoff will be gradual, and that accommodative monetary policy remains in place.

Markets have certainly gotten the message. While some non-voting FOMC members have called for a rate hike as soon as April, market participants know whose opinion matters most. With the Fed Chair issuing clear concern over the state of the "global economy" - she mentioned it nine times over the course of her remarks - investors are taking it as a sign that, with so many economic concerns in each corner of the globe, the Fed won't be tightening policy with any expedience.

Table 1: Fed Funds Futures Contract Implied Probabilities: March 30, 2016

Fed funds futures implied probabilities

Following Fed Chair Yellen's remarks, market participants are dismissing the hype that April is a "live meeting," and moreover, that given upcoming geopolitical risk (UK elections, EU-UK referendum "Brexit", US elections, emerging security concerns in Europe), a rate hike in the first half of the year is unlikely altogether (just 28%). Per the Fed funds futures contract, the first hike is expected in November 2016 - although with the US election around the corner, it seems highly unlikely that the Fed would act at a non-press conference meeting.

How far we've come. In December, the Fed said it was looking to raise rates four times this year. Yesterday, Fed Chair Yellen made it seem like the probability of multiple rate hikes this year is dwindling. The US Dollar is all the worse for the wear; deflating interest rate expectations have undercut the greenback's prime source of strength over the past several years (as was to be expected - we didn't think the Fed's hiking cycle would help the US Dollar).

As market participants come to terms with what the Fed may or may not do, there is certainly a sense of 'relief' out there: the US Dollar is falling across the board; US bond prices are rallying; and US equities are rallying. What relief? That the Fed is going to be keeping rates low for much longer than previously understood.

If the Fed Chair has just potentially given the green light to further US Dollar weakness, the charts should reflect it. Given the standing of the USDOLLAR Index, and a closer look at the individual components, it seems necessary to issue further concern about the US Dollar - more than indigestion may be due ahead.

Chart 1: USDOLLAR Index Daily Chart (February 2015 to March 2016)

After Yellen, the US Dollar May be in Serious Trouble

As the USDOLLAR Index approaches the October 2015 and March 2016 swing lows around 11840/50, we're drawn to one component in particular.

Chart 2: EUR/USD Daily Chart (February 2015 to March 2016)

After Yellen, the US Dollar May be in Serious Trouble

EUR/USD is quickly approaching its March high, and in context of the triangle that may have been forming since October 2015, a breakout to the topside may be due. For a full technical review of EUR/USD, as well as the USDOLLAR Index, GBP/USD, AUD/USD, USD/JPY, USD/CAD, and NZD/USD, please watch the video above.

Read more: EUR/USD Stuck in No-Man’s Land Headed into Q2’16; Don’t Discount ’Brexit’

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.


News & Analysis at your fingertips.