The U.S. dollar is off to a strong start this week as the greenback recovered earlier losses against the euro and British pound and drifted to the top of its range versus the Japanese Yen. This strength can be attributed completely to pre-Yellen positioning because yields are down and data was weak.

Durable goods orders fell -1.1% in the month of May, which was significantly softer than anticipated. Manufacturing activity in the Chicago and Dallas regions also fell short of expectations, supporting concerns about the justification for Fed Chair Janet Yellen’s hawkishness. Yet U.S. rates spent the majority of the day in negative territory, making us leery of the dollar’s rally especially ahead of tomorrow’s consumer confidence report, which should be softer given the drop in the University of Michigan index.

But what matters most this week is Fedspeak, and investors are buying dollars on the hope that Yellen will repeat the hawkishness that sent the dollar sharply higher mid June. If she does, USD/JPY could minimally reach 112.20 but if she expresses even a hint of concern, USD/JPY will slip back down to 111.00. Having closed at its highs of the USD/JPY, a break of 112 could even happen before Yellen speaks.

Technically, USD/JPY ended the day right above the 100-day SMA. While this may be a key level, the fact that the pair took out this month’s high at 111.78 is enough to ensure that further gains on a technical basis are likely. The next “area of resistance" is the March 31st and May 24th spike high near 112.20 and then 112.50. If USD/JPY sinks back below 111.50, then a move back down to 111 is just as likely as a move above 112.