FOREX NEWS: DOLLAR BOOSTED BY HAWKISH YELLEN TESTIMONY. SUPPORT THREATENED
Forex News: Most of yesterday’s trading session was bearish but the Dollar really took off during Fed Chair Yellen’s hawkish speech. The pair reached horizontal support and the 50 period Exponential Moving Average.
The sellers are facing an important barrier at 1.1400 and the 50 period EMA. As long as this zone is not clearly broken, we can still consider the current move a retracement in an uptrend but if the barrier will be broken, we expect to see a drop into 1.1340. Given the US Dollar strength seen yesterday and the overextended condition of price on a Daily chart, we favour a drop through the current support.
First release of the day is the U.S. Producer Price Index, an indicator that shows changes in the price charged by producers for the goods they sell. A higher producer price leads to a higher consumer price, thus a higher inflation and this usually strengthens the US Dollar. Today’s forecast is a change of 0.0%, same as previous and the time of release is 12:30 pm GMT.
At 2:00 pm GMT, Fed Chair Yellen will testify again on the Semiannual Monetary Policy Report, this time before the Senate Banking Committee. This testimony should be treated with caution because it can spark strong movement on USD pairs.
Yesterday the Pound was strengthened by better than expected employment data and the pair climbed above resistance, breaching the 50 period Exponential Moving Average. Janet Yellen’s testimony erased some of the US Dollar losses but the effect wasn’t substantial.
The level at 1.2815 has become support as seen from yesterday’s price action, but the buyers couldn’t break the confluence zone created by 1.2900 and the 50 period Exponential Moving Average. The last 4 hour candle is showing a long wick in its upper part, suggesting rejection, and this increases the chances of a bounce lower, into 1.2850. On the other hand, the RSI is bouncing from its oversold level and this increases the chance of a continued move higher. Overall the picture is mixed and the way price behaves around the current resistance will decide the next move.
The economic calendar is light for the Pound, so the pair’s direction will be decided by the technical aspect and by the U.S. events mentioned above.