USD: more consolidation before upside – BMO

FXStreet (Barcelona) - Analysts at BMO Capital Markets, remain bullish on USD, expecting a month of consolidation before the Dollar gains pace to the upside, and further comment on the risk for the currency into Yellen’s testimony.

Key Quotes

“Trumping the data, though, is the semi-annual testimony of Fed Chairman Yellen. Ms. Yellen speaks before the Senate Banking Panel on Tuesday. As is customary, the session includes a written statement followed by lengthy Q&A.”

“The process will be repeated in front of the House Financial Services Committee on Wednesday.”

“The testimony (or more likely the Q&A) might reveal hints of Yellen’s latest thinking on the timing of the first rate hike and necessary conditions.”

“For FX markets, the key question is how much Yellen seems to care about recent USD appreciation. That issue is highly likely to come up in one of the two day’s worth of Q&A.”

“Any hint that USD appreciation is an issue that could slow the onset or pace of rate hikes could cause the USD to recede a bit. Barring a major surprise, we expect another range bound week for the broad trade weighted USD index.”

“We are still bullish, but we suspect that another month or more of consolidation will be needed before the USD can regain its upward momentum.”