There was little follow-through after the pound broke above 1.4040 but the cause for the cable’s reverse is easy to identify. In the 4-hour chart there is a falling trendline beginning at the January high which prevented sterling bulls from pushing GBP/USD beyond 1.4070. Rather, bears were swooping in around that trendline, sending the cable back towards the 1.39-support. Whether 1.39 holds, remains to be seen. If the pound drops below 1.39 we favor a bearish stance with lower targets at 1.38 and 1.3750. On the topside, we would need to see another break above 1.4050 in order to anticipate further bullish momentum.
Unlike the GBP/USD, the EUR/USD remained within a narrow trading range between 1.2355 and 1.2275.
Today’s testimony from new Fed Chair Jerome Powell will be front and center in the markets. At 13:30 UTC Powell’s Congressional Testimony will be released while Powell testifies to House Financial Services Committee at 15:00 UTC. This important event risk could have a strong impact on the dollar’s price action which is why traders should prepare for high volatility around his speech.
Powell will testify on the economy and monetary policy and if he gets specific on rate hikes and emphasizes the potential need of even 4 rate hikes this year, the dollar could rally. If he, however, refrains from providing specific guidance on what to expect from the Fed (most likely scenario before the Fed’s next meeting on March 20-21), the dollar could be losing ground against its major counterparts.
Other economic data reports will take a backseat to Powell’s speech today.
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