EUR Tipped to Hug Trading Range Above 1.3

The first part of Fed Chairman Ben Bernanke’s testimony before the US Congress triggered some seesawing among FX majors, but more range-bound activity is expected to characterise today’s session, as his reply to the US Senate is not expected to offer fresh news and the rest of the daily agenda is not particularly heavy.

UniCredit say ground north of 1.3 is proving to be a solid base:

"EUR-USD is likely to remain in trading range in the wake of Mr. Bernanke’s testimony yesterday. Some base-building has been surely created above 1.30, but also given the dovish ECB stance, EUR-USD upside potential is unlikely to exceed for now the next key resistance levels seen at 1.3242 and 1.3310."

Piet Lammens at KBC Markets has suggested the euro will struggle to establish fresh gains as the US dollar is looking far more assured today:

"It looked that the dollar Found some kind of a ST bottom yesterday even as the Fed president was rather soft in his comments. In a day-to-day perspective, the technical rebound of the dollar (both against the yen and the euro) might still go a bit further.

"EUR/USD still faces some political event risk. We still don’t see a strong case for a sustained rebound of the EUR/USD. The 1.3207 reaction top should hold unless US eco data would sharply surprise on the downside."

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US dollar outlook dominated by leading indicators

In the US, investors will look out to the jobless claims, the Philly fed survey and the leading indicators. The claims are expected to return the 345000 area after last week’s up-tick.

"The Philly Fed survey is expected to return part of last month’s gain. For the leading indicators, the risk are on the downside. However, we don’t expect the US data to be really negative for the dollar. The Q&A session of Bernanke before the Senate might still bring some headlines, but we assume that the Fed president will try to avoid additional market volatility," says Lammens.