USD: Bias is for an eventual upside break - BBH

Research Team at BBH, notes that the US dollar had spent the last full week of August mostly confined to narrow trading ranges against the major currencies until the Yellen spoke as at the end of the week.  

Key Quotes

“She confirmed the constructive assessment of the economy already offered by both Fischer and Dudley in recent days. While acknowledging that the case of a rate hike was strengthening, she shed no light on the timeframe. 

The tone of her remarks suggested scope only one hike this year, not the two that the Fed dot plots pointed to in June.  However, Fischer quickly and explicitly noted that nothing Yellen said ruled out a September move of two moves this year for that matter.   Essentially, he was simply explaining that Yellen was not revealing a change in the Fed's stance.  After whipsawing, the dollar rallied, and the odds of a September rate hike finished near 40% compared with 32% the previous day and 22% at the end of last week. 

For eight sessions, the Dollar Index has bounced between 94.00 and a little 95.00, where the 100-day moving average is found. Our bias is for an eventual upside break.  The RSI is soft but sideways, while the MACDs appear poised to turn higher.  The slow Stochastics also are turning from over-sold territory.  The Dollar Index closed above the 95.30 area, which houses a retracement objective and the 20-day moving average.  The Dollar Index has not closed above this average since July 28.  A break of 94.00 undermines the bullish case.”