EUR/USD: Trades higher after Yellen's speech

The EUR/USD pair remained stronger on Tuesday and was trading 0.5% higher on the day at the time of writing, hovering at around 1.2130.

Traders reacted to the testimony of  Secretary of the Treasury nominee Janet Yellen before the Senate Finance Committee. As her remarks were available ahead of the speech, everything had been digested before she started speaking.

Nevertheless, there was some volatility in the markets, especially in stocks. 

She said that the US doesn't favor a weak US dollar (although the Fed and the Treasury are doing everything they can to debase the greenback). 

Moreover, she added: "Neither the President-elect, nor I, propose this relief package without an appreciation for the country's debt burden, but right now, with interest rates at historic lows, the smartest thing we can do is act big. In the long run, I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time."

Basically, nothing is changing, and the deficit will continue to soar, while rates must remain at the historic lows, prompting inflation to accelerate. In that kind of environment, the USD should head further lower. 

The EUR/USD pair managed to defend the first major support near 1.2060 and jumped higher, eyeing the initial resistance near 1.2170. If the euro gets through that selling area, it might revisit the cycle highs above 1.23.