Treasury Secretary and former Federal Reserve Chair Janet Yellen said interest rates may have to rise modestly to prevent the U.S. economy from overheating due to higher levels of government spending. While Yellen said in a later interview that she wasn’t predicting or recommending rate hikes, her comments raised concerns that Fed policy makers may move to tighten sooner than the market expects. The U.S. dollar strengthened modestly against other peers but important support levels such as 1.20 in the EUR/USD and 1.38 in the GBP/USD still remain unbroken.
EUR/USD: If the euro falls below 1.1970, it could extend its slide towards 1.1920 and 1.1880. On the topside, a break above 1.2070 could spur bullish momentum towards 1.2150.
GBP/USD: Prices were little changed ahead of tomorrow’s key events. We expect the cable to trade between 1.40 and 1.3790 today.
DAX: The index broke below 15000 and extended its slide towards 14800 – the ascending trendline of the DAX’s overall uptrend channel. As long as the index holds above 14800, we anticipate a rebound towards 15200.
On the economic docket, U.S. ADP employment change is due today at 12:15 UTC which could have an impact on USD crosses.
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