Video length: 00:08:11

Federal Reserve Chair Janet Yellen’s two day testimony in front of Congress got off to a better start than most market participants could have hoped for yesterday. The Fed chair’s comments on inflation being a symmetric target – that rates could stop rising if inflation stumbles – is seen as perhaps a dovish handicapping of a hawkish policy stance overall: the Fed intends to normalize rates this year, so long as the dual mandate of price stability and maximum employment are met.

To markets, this was essentially the ‘all clear’ signal: things are going well enough right now, but if they get worse, the Fed is their for support. Risk appetite is surging as a result of this realization, with US equity markets pushing all time highs and the higher yielding commodity currencies enjoying quite the rally the past 24-48 hours.

With rising yields in developed economies a key focus at present time, widening interest rate differentials versus lower yielding currencies like the Japanese Yen or Swiss Franc have proven to be significant catalysts in the near-term. Buoyed by a more hawkish Bank of Canada than expected, CAD/JPY is now testing 88.90/95, a key area that’s been carved out as support and resistance on numerous occasions since August 2015. Likewise, as the stereotypical carry trade, AUD/JPY has moved higher out of its short-term consolidation to test its highest levels since March.

The fact that both AUD/JPY and CAD/JPY have been able to rally in such fashion the past few days is a sure sign that investor risk appetite is picking up. In turn, this has left the European currencies behind: it’s a problematic sign that neither EUR/USD nor GBP/USD can enjoy significant gains during a period in which ‘risk’ is clearly ‘on.’

See the above video for a technical review of the DXY Index, EUR/USD, GBP/USD, USD/JPY, USD/CAD, AUD/JPY, CAD/JPY, Gold, and Crude Oil.