On Wednesday, the Federal Open Market Committee Raised Rates to 1.00-1.25%, which was a 25bp hike and said they anticipate another hike before the year is over. The rate hike was not a shock, but sticking to their expectations to raise rates through 2019 that puts the terminal rate at 3.00%. This persistence in expected hikes caused USD strength to emerge as Yellen noted that the Fed continues to see conditions favorable in place for inflation to rise.

While the data in the US is recently weak, it is going to be difficult for the market to fight the Fed who expects to continue raising rates. While Yellen noted that the Fed would avoid the risk of hiking too rapidly, they are likely working toward carefully pulling the Fed Funds Rate (FFR) as far away from the zero-bound as possible so that when there is another recession, the Fed will have “bullets” in their gun.

As Yellen spoke, there was a reversal of sorts in G10 FX in favor of the USD. USD/JPY would eventually halve its intraday session drop, USD/CAD would eventually move to new daily highs. The question that many will likely ask after multiple weeks of USD weakness is whether we’ll see a pop after the drop? It’s a question worth asking, and if we see strength in favor of the USD against commodity currencies like the Canadian Dollar, which recently pushed toward 2017 highs and the New Zealand Dollar. Traders can also watch the Dollar Index (DXY) to see if the price can break above two recent lower highs at 97.53/78, there could be a pop indeed in store for USD. However, if the price remains below resistance, I will continue to focus on downside extension targets at 95.85-94.83.

Closing Bell’s Top Chart: June 14, 2017, EUR/USD pulls away from strong resistance at 1.13

Tomorrow’s Main Event: GBP Bank of England Rate Decision (June 15)

IG Client Sentiment Highlight: NZD shorts jump on belief strongest G10 currency is overcooked