You can preach data dependence but at some point you need to interpret the numbers.
1) What time is Yellen's speech?
Yellen speaks in Providence, RI at 1 pm ET (1700 GMT). The topic of the speech is the US economic outlook. A text is expected but no Q&A. Note that it's a holiday on Monday in the US so liquidity could quickly run thin.
2) What will Yellen say?
We don't know for sure but we're told it will be a pretty big speech on the economic outlook. Yellen is particularly focused on the outlook for employment and the latest jobs report was soft but the four-week average of initial jobless claims is at the best level in 2015 years.
3) What are the downside risks for the US dollar?
Yellen is a dove. Not only that, but she is abundantly cautious and won't commit to hiking rates until she's entirely confident that the economy is picking up. Given the sour series of economic indicators in the past 8 weeks, there is just no way she can be satisfied with the outlook. The Fed has maintained that Q1 was an aberration but that's getting more-difficult to believe. The Fed has also hinted that it wants to hike by about September. I don't see Yellen taking anything off the table but if she expresses disappointment about the economy, the dollar will decline.
4) What are the upside US dollar risks?
For starters, the US dollar has shown a solid ability in the past two weeks to latch onto good news and disregard bad news. The market has an amazing ability to see and hear what it wants. If Yellen is partly upbeat or says anything to indicate that a September rate hike is a distinct possibility, then the US dollar rebound that started this week can extend.
5) What's up with the late-Friday speeches?
In late March, Yellen delivered a similarly-important speech in San Francisco late on a Friday. The excuse then was that it was on the West Coast but this time she's on the East coast. That one focused more on monetary policy and less on the economy but it's a bit of a head scratcher that she would deliver two important speeches as trade desks begin to close -- especially ahead of a long weekend. Note that SIFMA recommended a bond market close at 2 pm ET (1800 GMT) so the market will only have one good hour to react.
