The USD Contracts after Yellen's Testimony
Global equities generally remained supported due to increased risk appetite. The US also plans to pump even more money into the economy. Following Yellen's testimony on Tuesday, the greenback remains suppressed as the USDX slightly fell. Generally, the USD continues to move within a tight range versus the several major currencies like the Yen, only losing to the GBP.
Despite USD shaving gains, most currency pairs remain within a bear breakout pattern. Of note, the greenback was mostly ranging versus the Yen but losing slightly to resurgent GBP and Euro. However, it remains suppressed versus the Yuan, whose government continues to set the reference higher versus the USD as they relieve the money markets' tightness. For the third day, the USD remains weak versus the Yuan, adding a four-day streak. During her testimony, Yellen disapproved of the PBoC's policies that don't sync with globally accepted standards and partly why the Trump administration squeezed and publicly castigated China for their currency action. The main focus on Jan 20 remained on the BoC. Although it was widely expected to maintain their interest rates at 0.25 percent, the CAD strengthened versus the USD even though preceding economic news were dismal.
Impact on the USD:
Neutral to bearish. Analysts are confident that the current USD short squeeze will likely continue. The USDX breaking above 91 to a three-month high will mark the end of the 2020 bear market, where the greenback performance was dismal against major and exotic currencies.
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