The USD is weak leading into Chair Yellen’s first testi‐mony as Fed Chair. The DXY has traded to a fresh 9‐session low and is flirting with a break of its 100‐day MA and trend support (see bottom chart). The combination of anticipation over Chair Yellen’s testimony and Japan on holidays have left for relatively quiet markets. However it isnoteworthy that volatility levels continue to drift lower across all assetclasses and regions (see middle chart) suggesting that the January periodof risk aversion has dissipated. We expect to see rolling periods of risk in2014 driven by a shift away from unconventional monetary policy and reintroduction of tail risk.
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Scotiabank