EUR/USD analysis: Dollar strong ahead of Powell's testimony

EUR/USD Current price: 1.2305

• Waiting for Fed Powell´s testimony before the Congress for fresh clues.
• Macroeconomic data being ignored, sentiment-related trading persists.

Sentiment toward the American currency was once again what led movements across the FX board at the beginning of the week, with no big shocking moves amid a scarce macroeconomic calendar and mixed signals coming from other markets. US Treasury yields eased before Wall Street's opening, with the 10-year note yield down to 2.83% intraday from Friday's close at 2.88%, but US equities rallied to their highest in 4-weeks, surpassing the levels previous to early February wild slump. The EUR/USD pair settled a couple of pips above the 1.2300 level, little changed from its previous close. Draghi's testimony before a special parliamentary commission ended up being a non-event as he reiterated what the market already knows about inflation not yet showing convincing signs of sustained advance toward the central bank target, while also repeating that growth is stronger than previously expected. In the US, January New Home Sales was a major disappointment, as sales plunged by  7.8% against an expected advance of 3.2%, while the Chicago Fed National Activity Index shrunk to 0.12 from the previous 0.14 in the same month, with the only positive note coming from the Dallas Fed manufacturing index for February, up to 37.2 from a previous 33.4.

This Tuesday, things will become more lively with preliminary German inflation figures, EU consumer and business confidence, and US Durable Goods Orders, none of them capable to offset sentiment-related trading, but as said in a previous update, indicators that will have a certain weight once the market moves past this stage. The more relevant event for the day will be Powell's testimony before the Congress, on the Semiannual Monetary Policy Report, with investors looking there for fresh clues on the future of rates.

Technically, the 4 hours chart shows that an early to 1.2354 was contained by selling interest around a bearish 100 SMA, with the pair now also below the 200 SMA and struggling around a flat 20 SMA, while technical indicators entered bearish territory, but lack directional momentum. The risk is lean toward the downside, although the pair needs to break below 1.2260, last week's low, to gain actual bearish traction, with scope then to extend its decline down to 1.2205, February monthly low.

Support levels: 1.2260 1.2230 1.2205  

Resistance levels: 1.2340 1.2380 1.2425  

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