Dollar’s longs reflecting desperate gains upon Yellen’s move

The large majority of price sensitive market participants still seem to be betting on USD longs. However, these only have a reasonable risk reward profile medium term. I doubt that nobody will square their USD-long positions ahead of the FOMC meeting.

That is exactly the reason why the FOMC - no doubt aware of the fact that it is facing a balancing act - will want to avoid surprises, particularly at the beginning.

That means Fed chair Janet Yellen will try and cause as little a market reaction as possible and to be as boring as possible this week. In view of the attention that will focus on her words that will not be an easy task.

Higher interest rates would make the U.S. dollar more attractive to yield-seeking investors

In turn the market response this week is hard to foresee systematically but will be the residual effect that Yellen cannot control. So the question arises how much USD longs will pay off in a situation such as this.

The US dollar sprinkled gains against major currencies crosses, recuperating some of last week's lost ground, USD/JPY eased up 0.07% to 121.07. the dollar was higher against the pound, with cable was down 0.27% at 1.5176 and while USDCHF adding 0.17% to 0.9843. and Lonnie also gained 40-45 pips from today's open.