The U.S. dollar has become more fragile following the global market turmoil. Until recently, the greenback was considered a safe haven currency but the roles have reversed. Since the Federal Reserve set up a policy tightening path amidst global economy slowing and other central banks turning to negative rates, the U.S. dollar lost a large part of its demand. Investors are sceptical whether the Fed can continue raising interest rates this year, making the long-dollar trade unattractive.
Fed chair Janet Yellen is scheduled to appear before the House Financial Services Committee today at 15:00 GMT and market participants will be scrutinizing her remarks for hints of whether the Fed may downplay chances of a March rate hike. Even though the U.S. job market has been surprisingly strong, many analysts believe the central bank could shift to a dovish tone, preparing the market for no changes next month. However if Yellen keeps the door open to possible tightening in March, we could see the dollar strengthening. We will wait and see and prepare for high volatility at the time of the testimony.
Before the main event risk, sterling traders should keep an eye on U.K. Industrial and Manufacturing Production, scheduled for release at 9:30 GMT. The cable traded between 1.4515 and 1.4378 providing no clear direction. While today’s price action will be determined by investor’s appetite for U.S. dollars, we will focus on the following important price levels:
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