Slow-moving recovery from the post-Yellen dip
USD/JPY is back to square on the day in a slow retracement to 114.00 from as low as 113.56. The selling started Friday after Yellen virtually confirmed there will be a rate hike on March 15. It was a counter-intuitive move that looked like profit taking and selling-the-fact.
24 trading hours later, the dollar is back on its feet and slowly climbing higher. It's erased the post-Yellen losses versus the pound, Aussie and loonie.
It's going to be very tough to fight the dollar between now and the FOMC decision, when another round of selling the fact could take place. The debate afterwards will shift to how many more hikes the Fed signals.
To my way of thinking, they will want to maintain as much flexibility as possible so that raise the risk of USD disappointment. But until then, expect a slow USD creep like we see today.
