While Yellen should continue to emphasize that the Fed wants to raise interest rates, she's not expected to sound hawkish enough to spark much of a rally in the dollar. Strategists don't expect her to put the central bank's September or even November meetings in play with her comments.
"I don't expect hard signals on rates from Janet Yellen, because the data is so uncertain," said Alan Ruskin, head of G-10 currency strategy at Deutsche Bank. He pointed to Yellen's speech at Harvard University in May where she sounded ready to pull the trigger on rates, with her comment that it would be appropriate to raise rates in "coming months" if the economy holds up.
But the Brexit referendum and squishy data have held back the Fed. The data are also confusing with super-strong payroll data, and then last week's flat July retail sales. "She doesn't want to get caught up twice. I think the data does the speaking," Ruskin said.
He said he believes the market should be giving higher odds to a rate hike, now about 50-50 for December. He also expects the dollar to strengthen against the euro by year-end, with the common currency at 1.05 to the dollar. It was at 1.11 Monday.
There are positives from a weaker dollar. It's good for U.S. corporations that make profits overseas, positive for commodities prices and for U.S. exports. A strong dollar, on the other hand, could be problematic in that if it strengthens too much and too fast, it could hurt U.S. exports and stall out emerging market economies, particularly those that rely on commodities.
"For now, the bias in the dollar is buy EM (emerging markets), sell the dollar. It seems to be one of those trends the market is latching onto," said Win Thin, senior currency strategist at Brown Brothers Harriman.
The dollar index was trading around 95.61 on Monday. Brown Brothers said a drop below 95 would be bearish, signaling a break to 94.50 and the potential of 94 for the index.
Thin said Yellen is unlikely to say anything that could change the market's view on rate hikes for September or November, and at best, she could increase the market view that December may be the time for an interest rate hike.
For now, the dollar is not reacting to the election, but if there's any change in the odds for Trump, the greenback could react to his negative comments on trade and uncertainty surrounding his policy. Trump last week told CNBC he is not anti-free trade.