One man will dominate the FX scene today, how will FX markets react?

UniCredit Bank say they are bullish on the euro:

"EUR-USD is likely to extend its rebound above 1.31 if Chairman Ben Bernanke reaffirms his recent remarks, reassuring markets about the Fed's intentions. Yet, a rally towards 1.3240 and above is unlikely, while downside potential, if any, is expected to stay confined to 1.2950."

Piet Lammens at KBC Markets says he is backing the US dollar today:

"The market is probably far less dollar long compared to where it was a week ago. So, there is upside potentialdollar long compared to where it was a week ago. So, there is upside potential for the dollar if the Fed president confirms the separation between a tapering of QE (starting in September) and interest rate hikes (which should not be expected anytime soon). We stay EUR/USD short.

"However, as the Bernanke testimony contains some kind of a binary risk, stop loss protection might be warranted to defend a break above the recent op (1.3207)."

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There is only one event in town: It's called Bernanke

As mentioned above, intense scrutiny will be given to Ben Bernanke today.

Lloyds Bank Research tell us today's testimony to Congress is of particular importance:

"Fed Chairman Bernanke’s testimony to Congress is likely to generate even more interest than usual. Dovish comments from him last week led global markets to rally and sent the US dollar lower against most currencies. There is some confusion as to whether Bernanke was hinting at a delay in the starting point for Fed tapering of QE, widely expected to be September, or whether he was merely (again) trying to differentiate between the ending of QE and raising interest rates.

"This week’s testimony will give him another chance to state his case. We expect him to reinforce expectations that tapering will start in the autumn but also to confirm that the Fed has no plan to raise interest rates anytime soon and probably not until well into 2015 at the earliest."

Kathy Lien at BK Asset Management is tipping the euro to appreciate against the US dollar ahead of the testimony:

"Going into Bernanke's speech, we expected the dollar to weaken but the question now is how the speech itself could affect the greenback.  While we don't expect Bernanke to say anything dramatically different from last week, speeches by policymakers are organic and under tough grilling from Congress, Bernanke could reveal more than he otherwise wanted."

Lammens says:

"We (and the markets) expect that the Fed president will maintain a soft tone and confirm that interest rates will still stay low for long.

"The key question for markets is whether the Fed president will refine the time path for eventual tapering of asset purchases. Will Bernanke openly question the market expectation for a start of the tapering in September? "