Will Yellen 8217 s testimony upset the bulls

Tight ranges are still in play from yesterday, with USD/JPY gaining back some ground after a strong yen run. The Bank of Japan kept its monetary policy unchanged and trimmed the GDP forecast, helping USD to remain higher against the yen. Still the old support of 101.70 is its next target to break.

The US has some decent data to be released today, with core retail sales up first. It is expected to come in at 0.5%. More importantly, however, Fed Chair Janet Yellen will be giving her testimony, with most expecting her to be dovish. Rates are expected to remain low for long periods of time. This could counter the recent gains USD has had against bets that the Fed is in a good position to raise rates due to the unemployment rate dropping quicker than expected.

The euro is still hovering just above the 1.3600 level, waiting for big announcements from the ECB on whether or not they’ll add QE to increase inflation. ECB’s Draghi was talking last night and didn’t give any more away, with comments like ‘the ECB are ready to use unconventional tools and QE falls squarely within our mandate.’

The IMF is also putting pressure on the ECB to act sooner rather than later. Comments from yesterday included ‘the ECB should consider asset buying if inflation remains low’ and the ‘eurozone is weak and risks falling into deflation.’

Today the German ZEW is released with an expected drop to 28.9. This may get pinned on the unrest in Ukraine and Russia.

In the UK today CPI data will be released, with an expected rise to 1.6%. This may give GBP/USD some support as its recent decline from five-year highs has continued this morning and is now down through the support level of 1.7070. This was helped along by some top banks putting out trade ideas to short the GBP ahead of the CPI release.

Bank of England Governor Mark Carney is also set to say a few words later about the financial stability report.

EUR/USD

Supports 1.3590 1.3575 1.3500 | Resistance 1.3630 1.3650 1.3700

USD/JPY

Supports 101.20 100.75 100.50 | Resistance 101.70 102.30 102.00

GBP/USD

Supports 1.7030 1.7000 1.6980 | Resistance 1.7100 1.7140 1.7180