Crucial week for the Dollar with Yellen's speech and NFPs coming up

General market theme
The week after the Easter holiday is usually a quiet one as traders return to their desks after a couple of days off however this  week is expected to be quite interesting and full of important events. The currency in focus for the days ahead is going to the be the US Dollar, between the Non-Farm Payrolls report on Friday and Janet Yellen’s speech today the buck will attract investors’ attention. As we move further into 2016 interest is high on whether the Fed will press on with their hiking agenda as their plan includes 2 more rate hikes within the current year. Apart from the Dollar the Euro will also be in play with key reports also pending for release the new few days.

Price action highlights
The Euro recovered to the upside yesterday after almost a week of trading sideways just above the 1.1150 support area, the low participation and volume in the markets over the past 24 hours allowed the Single currency to mount a recovery rally above the 1.1200 barrier. However overnight most of the gains were erased and now we need to see whether the Euro can really sustain a break above the 1.1200 level which will in most extent be decided from the Dollar’s price action. If Yellen sounds bearish and concerned once again then the Euro will seek fresh highs while a bullish Fed president might drive the Single currency towards its previous lows.

Benefiting from the low participation on Easter Monday the Cable also ran a correction rally higher with the currency climbing above the 1.4200 level and making an effort to reach the 1.4300 area. Overnight the Pound pulled back slightly but the momentum seems intact unless the Dollar receives considerable support from Yellen’s speech today. The Cable has been under pressure recently and will continue to do so as long as the possibility of a Brexit remains a reality so we need to approach the current correction with caution and restraint. However further weakness from the Dollar could allow the Pound to extend its gains and the next target higher could be as far as the 1.4400 area.

Focus of the day
As we mentioned a couple of times above the most important event of the day will be Janet Yellen’s speech to the Economic Club of New York today as the Fed chief is expected to make several references to the domestic economy and the Fed’s plans for it. Other than that the BoE Financial Policy Committee will release is statement earlier in the day so our focus should also be on the Pound today since the currency is already running a correction attempt.