"Essentially, Bernanke's speech signaled to the markets that the Fed is not opposed to more than one rate cut," Resnick said. "Prior to last week, the market had factored-in one more rate cut. Now it looks like we may get two, or about 75-100 basis points, and that's driving the dollar sell-off today."

ECB comments

In addition, recent comments by the European Central Bank indicating that the bank is still not happy with Europe's overall inflation rate, is boosting the euro.

"At the year's start, the consensus was that the ECB would take a more accommodative stance regarding monetary policy, and begin to cut rates, but recent ECB statements have called that thesis into question," Resnick said. "A lot of forex players are re-assessing their dollar projections for the first half of the year." Still, Resnick added that he is sticking with his bullish dollar forecast for the year, and he expects the dollar to appreciate to $1.35 versus the euro by year's end.

To counteract the effects of the housing sector's correction and other drags on the U.S. economy, including high energy prices, the Fed has cut benchmark interest rates three times, starting in September 2007. The Fed Funds rate, the rate banks charge each other, now stands at 4.25%, and the discount rate, the rate the Fed charges banks for short-term loans, is at 4.50%. The Fed also set up a special term auction facility to help banks maintain short-term liquidity.