Yellen speech finally saved US dollar from 6-week low but down side risk still high

Yellen speech finally saved US dollar from 6-week low but down side risk still high

US dollar was solf off aggressively over the last six weeks although key economic data was better than expected. Before Yellen speech USDJPY touch 101.40 zone, a very strong support zone for USD. As widely expected, Yellen speech has finally save USD from selling off and USDJPY has bounced back to 101.9 from 6-weeks low by the end of US trading session.

Following are key points from Yellen speech noted:

– Yellen see growth is solid and Q2 will be better than Q1,  which have been affected by the weather

Fed is not satisfied with the labor market performance

-Fed worried about the housing market activity

– Fed see the labor force participation stable because part of the decline is weather related
optimistic about spending and productivity, expected a stronger growth in 2014.

-Taper will continue at current pace as long as outlook see improvement

-Low inflation and labor market slack means high degree of accommodation remains warranted

-If Fed see improvement in the labor market activity, QE will end in this year

-Fed will most likely raise the Interest on Excess Reserves rate before raising the main interest rate

-There will be no timetable for the first rate hike, this is different with what Yellen confirmed on her speech in March that the first rate hike will be in 6 month after QE end.

It seem that traders have  no more clarity on monetary policy after Yellen speech, only growth confirmed. Fed monetary policy remain unchanged and they will continue to taper asset purchases at a measured pace as long as the outlook improves.

US dollar is bouncing back to 102 but down side risk is still at high level. We need to see more advance of USDJPY above 102 to confirm its up trend

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