Forex News: The support zone around 1.1110 held yesterday, generating a bullish bounce that took price well above resistance and consolidated the control of the buyers.
The bullish impulse started last week continued yesterday and now the pair is approaching the resistance at 1.1310 (better seen on a Daily chart). Once this zone is reached, we expect the sellers to enter the market and the pair to retrace lower. Adding to this bias is the overbought condition of the Relative Strength Index which has already moved above its 70 level, but a lot will depend on the testimony of Fed Chair Yellen which may have a strong impact on the US Dollar.
The day’s highlight is Fed Chair Janet Yellen’s testimony before the House Financial Services Committee, scheduled at 3:00 pm GMT. The topic will be the Semiannual Monetary Policy Report and volatility is expected to increase during the second part of the testimony when the Committee members will ask unscripted questions. Caution is recommended throughout the event as the US Dollar is likely to be strongly affected, depending on Yellen’s attitude and answers.
The pair had a mixed day yesterday, moving without clear direction between support and resistance. Price action confirmed 1.4475 as short term resistance.
The bulls made an attempt to move the pair above 1.4475 but failed and now the zone will act as resistance, possibly rejecting future upside moves. For today we expect an encounter with 1.4350 and our bias is bearish as long as price stays below the 50 period Exponential Moving Average and below 1.4475. A break of 1.4350 would solidify the short term control held by the bears and would increase the chances of a down trend resumption.
At 9:30 am GMT the British Manufacturing Production is released, showing the changes in the total output generated by the manufacturing sector. The indicator is considered to have a high impact on the Pound and higher numbers than the anticipated 0.0% (previous -0.4%) usually strengthen the currency, taking the pair higher. The testimony of Fed Chair Janet Yellen will have a direct impact on the pair so caution is advised.