AUD/USD: 0.8945EUR/USD: 1.3645There is very little to add today, with the markets having pretty much ground to a standstill ahead of Janet Yellen’s testimony to Congress, beginning later in the coming session. The Euro has drifted a bit higher, helped in part by the EU Sentix investor sentiment survey, which jumped to 13.3 in February, up from January's 11.9, much better than the expected 10.1 and the strongest reading since April 2011. The German GDP estimate was also revised higher, which would have done no harm either, from 1.7% to 1.75% for 2014.
In very quiet trade, the Euro has so far drifted to the top of the descending trend resistance that we have previously mentioned, at 1.3651, where so far it has stopped. It has barely backed off though, and if it can take this level out then we should be in for a further squeeze up towards the 50% pivot (red line) of the move from 1.3892/1.3476 at 1.3685, which is also the weekly Kijun/Monthly cloud base, and therefore should be very strong. Above this would see the bears scrambling as we head back to 1.3700 and above, initially to 1.3720 (daily cloud top) and possibly to the 24 Jan high at 1.3738. Above that, – which I don’t expect to see yet, if at all -, the way would once again be open to 1.3800 and above towards the recent 1.3892 high.
On the downside, (apart from a very early NZ move towards 1.3600), today’s low has been 1.3615, below which 1.3600 would again come under pressure. The 100 DMA/daily Kijun is now at 1.3605, the base of the daily cloud is at 1.3593 and the daily Tenkan is at 1.3580, so this area should prove pretty solid support. A break to the downside would see a run back towards the pre NFP spike low of 1.3550 and then to 1.3520 and eventually to 1.3500, which currently looks some way off.
It looks like a session of sitting on hands today until Yellen speaks, who is expected to maintain the current policy of slowly winding down the Fed's bond buying program through the course of the year but is unlikely to signal any move to begin raising rates. The 4 hour charts still point to a test of the topside, but are in danger of becoming a bit overbought, while the hourlies show a bit of bearish divergence.
Be flexible and trading the range within 1.36/1.37 seems the best plan today, with my own preference to selling into strength for an eventual retest of levels below 1.3600.
Economic data highlights will include:
Janet Yellen testimony to Congress, US Wholesale Inventories
