The last two days have been brutal to dollar bulls as risk aversion flows have blown all dollar long positions to bits. The shorts are already calling for the funeral of the dollar rally and even Goldman Sachs had to cover its long dollar trades for a -5% loss. But before currency traders jump on the sell the dollar bandwagon they may be wise to wait for Janet Yellen’s testimony.

Tomorrow the Fed Chair is due to testify in front of Congress and she may want to defend her hawkish stance by minimizing the current turmoil in capital markets and maintaining her view that further tightening may be necessary. If she remains resolute in face of this week’s events, sentiment in the market may shift and all the late dollar shorts could find themselves wrong footed.

In addition to fundamental factors that could slow the EUR/USD rally, the pair also faces formidable resistance at the 1.1300-1.1400 level and is likely to find more long term sellers in that zone