Keep in mind in the day ahead that there’s a certain type of traders with money at work and another type waiting to put money to work.
It’s not hard to figure out the way the flows will go before Yellen. Money has been pouring into US dollar longs over the past 6 weeks. The CFTC positioning data shows where speculators are placing their bets.
Some of that money started to come out today, which is why the euro, Canadian dollar and Aussie have bounced but there will be more traders looking to ring the register before Yellen’s comments hit.
The money on the sidelines is much larger and will be aggressive in the hours after Yellen. If she’s dovish there will be the usual US dollar slump but that’s largely expected and it’s only a matter of time until she switches to talking about rate hikes. If she’s hawkish then it’s ‘game on’ and a flood of money will pour into US dollar longs for days and weeks.
breaking dam
