14 Nov 2013
Yellen speaks the truth; reality check for USD bulls...
FXstreet.com (Barcelona) - A massive run to cover USD longs has been taking place late US session, after Yellen opened the can of worms suggesting the improvements seen in the US labour market are not enough to start the tapering process.
The announcement should not come as a surprise, as Yellen has always erred on the side of the dovish camp since the beginning of the GFC back in 2008. However, the upbeat NFP report from last Friday (+204k) led to a brief restoration of faith that the tapering could indeed be initiated next December. As a result, the spec community added USD longs which as seen time and time again, have had to be unwound yet again in the past hour on the realization of 'no-Dec tapering.'
Not to say that Yellen statement is a big turnaround in the fortunes of USD buyers would be an understatement, and while the technical breakouts in favour of the American currency still argue for a constructive stance, the risk of a counter-technical damage in growing. Against the Euro, the pair has regained 1.3470 and is threatening further gains in Asia.
GBP/USD saw heavy buying interest since the publication of an improved jobs report, which was followed by a less-dovish-tha-expected BoE inflation report, resulting on a clean 160+ pips rally, with next key resistance now at 1.6110. AUD/USD had also an abrupt rotation, producing a decent 50+ pips rally punchig through stops above 0.9360. USD/JPY came close to 99.00.
Key Quotes Yellen Statement
"Today the economy is significantly stronger and continues to improve. We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession. Economy must improve before Fed lessens stimulus."
"Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential."
"A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases."
"Our country has come a long way since the dark days of the financial crisis, but we have farther to go. Likewise, I believe the Federal Reserve has made significant progress toward its goals but has more work to do."
The announcement should not come as a surprise, as Yellen has always erred on the side of the dovish camp since the beginning of the GFC back in 2008. However, the upbeat NFP report from last Friday (+204k) led to a brief restoration of faith that the tapering could indeed be initiated next December. As a result, the spec community added USD longs which as seen time and time again, have had to be unwound yet again in the past hour on the realization of 'no-Dec tapering.'
Not to say that Yellen statement is a big turnaround in the fortunes of USD buyers would be an understatement, and while the technical breakouts in favour of the American currency still argue for a constructive stance, the risk of a counter-technical damage in growing. Against the Euro, the pair has regained 1.3470 and is threatening further gains in Asia.
GBP/USD saw heavy buying interest since the publication of an improved jobs report, which was followed by a less-dovish-tha-expected BoE inflation report, resulting on a clean 160+ pips rally, with next key resistance now at 1.6110. AUD/USD had also an abrupt rotation, producing a decent 50+ pips rally punchig through stops above 0.9360. USD/JPY came close to 99.00.
Key Quotes Yellen Statement
"Today the economy is significantly stronger and continues to improve. We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession. Economy must improve before Fed lessens stimulus."
"Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential."
"A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases."
"Our country has come a long way since the dark days of the financial crisis, but we have farther to go. Likewise, I believe the Federal Reserve has made significant progress toward its goals but has more work to do."