Chasing USD Strength On Fed Tightening Hopes Strategically Unrewarding
Daily Look

Chasing USD Strength On Fed Tightening Hopes Strategically Unrewarding

The US dollar is on the rise, extending its previous recovery. Will Yellen send it lower?

Here is their view, courtesy of eFXnews:

The  focus today for USD traders shifts to Chair Yellen’s speech  where  ING FX Strategy Research notes  its title contains the word ‘uncertainty’ which is the equivalent of ‘Kryptonite’ for currencies.

“The Fed story is a major risk to the dollar this week.  We suspect markets may have misinterpreted the signal from the dots  with the market-implied probability of a December rate hike shooting up to 60-65%. Fed talk this week – including a speech by Chair Yellen – may show that the dots are not a firm commitment to a December rate hike.

We think that the flattening bias in the US rate curve is set to remain in place – especially with Fed officials downgrading their neutral rate estimates by 25bps and signalling greater uncertainty over the extent of current hiking cycle.

The bottom line is that chasing dollar strength on any Fed tightening hopes has limited upside potential and will ultimately prove unfruitful,” ING argues.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.