Will Yellen push back on the hawks? USD bulls watch out ...

By FXstreet.com | Updated August 20, 2014 AAA

FXStreet (Bali) - The US Dollar keeps finding heavy buying interest, with the DXY breaking into new highs above the 82.00 handle, levels not seen since Aug 2013.

Amid this ongoing bull flight on the US Dollar, with the characterizations of a strong trending market (making the most of good news and shrugging off bad ones), taking short positions on the currency continues to be a dangerous propositions, with the market starting to show greater conviction on an earlier-than-expected tightening cycle in the US.

The FOMC minutes, published a few hours ago, saw a couple of paragraph that gave USD bulls an excuse to keep bidding the currency. See below the most hawkish lines traders noted, to be taken with a grain of salt given the conditionality added.

"Many participants noted that if convergence toward the Committee’s objectives occurred more quickly than expected, it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated."

"At the conclusion of the discussion, the Committee agreed to state that labor market conditions had improved, with the unemployment rate declining further, while also stating that a range of labor market indicators suggested that there remained significant underutilization of labor resources. Many members noted, however, that the characterization of labor market underutilization might have to change before long, particularly if progress in the labor market continued to be faster than anticipated."

While the US Dollar is likely to continue attracting strong demand, it is important to bear in mind that the market is possibly getting to bullish ahead of Friday's Yellen speech at Jackson Hole, time when she will be able to update markets on her view about monetary policy... and if history is any indication, so far the Fed Chairwoman has shown little, if any, signs that may suggest the bullish run of the US Dollar may be fueled further. At this stage of the US economc cycle, it wouldn't be a surprise to Yellen keeps finding creative ways to ease the excitement among the hawks.

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