General market theme
Traders are focused on the Dollar this week and we have mentioned a few times in our recent reports just how important Fed Yellen’s testimony to the House committee today is. The Dollar has seen big moves upwards and downwards in recent weeks as investors are trying to gauge the possibility of more tightening from the Fed in the next months.

Today the Fed Chairwoman will have to make her views clear to the US lawmakers and she can’t avoid hiding her views on the progress of the economy. A bullish view focused on the progress in several areas, mainly the employment market, should propel the Dollar higher again while a concerned tone focused on the global markets’ volatility will suggest no immediate rate hikes and will send the Dollar even lower.

Price action highlights
On the back of the concerns about the Dollar’s outlook the Euro was on the rise yesterday and hiked higher reaching the 1.1300 level. The Single currency has enjoyed strong gains against the Dollar in the midst of concerning conditions in the Eurozone so this rally should be regarded as extremely fragile. At this point though investors’ focus is on the Dollar and Yellen’s testimony today will dictate the price action in the Euro in the next 24 hours.

The Cable was again rather volatile and even though it managed to find some support around the 1.4400 area the reaction was not straight-forward. By the end of the day the Pound managed to test the 1.4500 area and then consolidated between these two levels waiting for fresh stimulus. Again, today’s Fed news will play a crucial role in how the Cable will trade with 1.4600 being the target to the upside and the 1.4300 level the short-term support.

Focus of the day
It is clear that today everyone’s attention is on Janet Yellen’s testimony to the House and traders will be keen on finding out where the Fed Chairwoman stands in her views. Even though the testimony will start at 3pm GMT the actual content of it will be released at 1.30pm GMT so traders need to be prepared. Earlier in the day the release of the UK Industrial and Manufacturing Production reports will probably not do much to affect price action.

Economic Calendar

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