Last week we have seen the dollar selling of quite hard against major currency like euro and the yen. Most
likely the market driven theme for the dollar sell of was the lower yields.

We know that lower yields means
a weaker US dollar. So lower yields makes the US dollar somewhat less attractive for investors.

Figure 1 show us the US 10 Year bond Yield which have broken an important trend line that kept in place the
current up trend this may suggest that we may see the 10 year yields going further down until we hit the 2.448 support line, so there is still some risk to see US 10 Year yields to fall and this could lead to more USD weakness.

However everything may change as we have the FED meeting in a couple of days and this can send the US yields back higher above the upward trend line.

Although Fed decided to do a small tapering and only cutting back their stimulus programs by a minor 10B, Ben Bernanke has said during the press conference that any further cut in QE is data depending and "end of QE certainly won't be at mid-year" suggesting that it will take longer before they will end the QE programme for good. And this can easily extend through the whole 2014 year and beyond, but that remains to be seen.


  • Figure 1. US 10 Year Yields.
If the Fed will decide to continue tapering with another 10B cut in their quantitative easing in the next meeting than we should see the US dollar start rebounding, but we have to take in consideration the other side of the market as well because the recent US economic data wasn't strong enough and Yellen can decide to take a pause from tapering until good economic data is seen, and this should continue put some further pressure on the back of the US dollar.

Best Regards,
Daytrader21.
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