The FX markets witnessed a classic risk-off action in the NY session as fears of faster Fed rate hikes saw Dow take a 380 point drop. The American dollar strengthened against most majors and gold but suffered losses against the Japanese Yen. The Asian equities traded under pressure, however, the risk-off moves in FX markets stalled, possibly because some traders believe Fed chair Powell may change tune during his Senat appearance (due later today).

However, Powell was unambiguously optimistic about the health of the US economy on Tuesday. Further, the Fed is not particularly worried about the flattening yield curve. Hence, Powell will likely reiterate his strong views on the economy and reinforce expectations of three more Fed rate hikes this year. This, in turn, could yield another bout of sell-off in the risky assets.

Also, an above-forecast US Jan core personal consumption expenditure (due at 13:30 GMT) would add credence to Powell's confidence on inflation and open doors for a broad-based rally in the USD.

The anti-risk asset story does not end here. Reports hit the wires in Asia that the White House could announce tariffs on steel and aluminum later today. An official announcement could mark the beginning of a full-blown trade war with China and would only add to the bearish pressure around the risky assets. Amid all this, the European PMI numbers may receive less or no attention from the markets.

What's brewing in the majors?

EUR/USD - Double top bearish reversal has been confirmed. The 5-day moving average (MA) and 10-day MA are trending lower, indicating bearish setup. The relative strength index (RSI) also favors the bears. So, it appears the spot could test support at 1.2092 soon. On the higher side, only a close above 1.2355 would signal bearish invalidation.

GBP/USD - Cable's fall to a three-week low of 1.3743 was at least in part due to EU chief Brexit negotiator Barnier's Brexit warning. Complications on the Brexit front would force investors to price-in a delay in the Bank of England (BOE) rate hike. That said, on the daily chart, the Pound looks weak, courtesy of a bearish symmetrical breakdown and a downside break of the ascending trendline (drawn from the Nov. 14 low and Dec. 21 low). The 5-day MA and 10-day MA are sloping downwards in favor of the bears. The RSI is biased bearish. So, the currency is on the back foot ahead of the UK manufacturing PMI release. A big beat on expectations could yield a corrective rally in the Pound.

USD/JPY - Pair's decline from the Feb. 26 high of 107.68 to 106.54 (Asian session low) is discouraging for the bulls. However, the spot is holding above 106.38 (Feb. 26 low), meaning the pattern of higher lows is intact and the bulls could attack the descending trendline resistance if the risk assets stabilize.

Major news

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