Yellen: caution is “especially” warranted: USD crashes

EUR/USD is leaping to resistance at 1.1250 as Janet Yellen’s speech is released. She talks about caution when raising the rates. Given risks to the outlook, the Fed should proceed “cautiously” with rate hikes. The inflation outlook has become more uncertain according to the Fed Chair.

EUR/USD is extending its gains and similar moves are seen across the board. This is a “sell the rumor, sell the fact even more” reaction.

Yellen also talks about the Fed having considerable scope for more stimulus. Are negative rates  still on the table in the US? And while she does warn about the global economy and is cautious also on oil prices, at least for now, the impact of the global turmoil will likely be low., thanks to the Fed’s low rates.

Currency reactions

• EUR/USD jumps from around 1.12 to a high of 1.1262 after hesitating around 1.1250.
• GBP/USD challenges resistance at 1.4365. The next line is 1.4440.
• USD/JPY is hardly holding onto 113.
• USD/CAD loses the battle with support at 1.3170 and is already battling the round level of 1.31. This comes despite lower oil prices.
• AUD/USD has  recaptured the lost level of 0.76.
• NZD/USD made the break above the 0.6820 level.

Janet Yellen speaks in New York about monetary  policy. She has a chance to clarify the stance of the Federal  Reserve:  extremely dovish as in the  FOMC statement and her accompanying press conference or  more upbeat as we’ve recently heard from her colleagues.

The latest Fed official to speak up was John Williams with whom she worked in the San Francisco Fed. He talked about two rate hikes in 2016. Bullard, which is a known hawk and  other  members, even mentioned April not only as a live meeting but also as a real chance to act. Howeve, markets are certainly skeptical about this.

Here  is how the initial rise looks on the EUR/USD chart.