Alpesh Patel's NewsletterPro - Fed Chairwoman Janet Yellen’s testimony pressured the Dollar, further losses down the way?

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© Alpesh Patel

Volatility seems to be back in force in most major currency pairs as the week draws to an end. We’ve had a slow start during the first sessions on the week but yesterday the geopolitical and economic developments produced significant swings in the major pairs we monitor daily.

The Euro disregarded the strong German Unemployment data and was under pressure during the morning session as tensions in Ukraine pose a risk for the European region. The Euro fell towards 1.3650 but it was later supported by Janet Yellen’s remarks that provided sufficient lift to drive the currency back above 1.3700 again. But what did the Fed Chairwoman say to her testimony yesterday that supported the Euro and other risk currencies?

Janet Yellen went a step further yesterday while testifying to the Senate and acknowledged the effect of the severe weather conditions to the domestic economy even though she reaffirmed her confidence in the tapering schedule. However, the fact that she said that the Fed needs to evaluate how much weather conditions have taken a toll on the economy and how much is purely attributed to a slowdown in the recovery was enough to hint investors on the possibility of a break from tapering or a slowdown in the pace of it.

The Pound had no UK-related news to trade on and the currency pair remained inside the tight range it has been trading in for the past few days. The Pound continues to receive mild support from the recent sale of Vodafone’s stake in Verizon Wireless and as Pounds continue to flow to the UK in the form of payments to the previous shareholders the pair remains above 1.6600.

The FTSE 100 started the day in the red but it gradually recovered to close above the 6,800 points. The UK index was lifted by Yellen’s comments that supported stock markets worldwide but from a technical standpoint FTSE’s short-term outlook remains negative and further losses could be expected.

Euro-zone inflation data and US Q4 GDP on the docket

The Economic Calendar today holds a number of important economic releases that have the potential to sustain the recent rise in volatility. Early in the morning the German Retails Sales are scheduled for release followed by the Euro-zone inflation data in the form of the Consumer Price Index and the Euro-zone Unemployment Rate. Figures are expected to print unchanged but the possibility of a surprise to the upside requires our attention.

Later in the day, a number of releases from the US could also provide friction in the markets. The Q4 GDP release from the US is the key focus here and figures are expected to print lower than last year. This release is a potential risk factor for the Dollar as a possible lower reading due to the weather conditions should pressure the Dollar lower.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

7.00

EUR

German Retail Sales

Medium

-1.7%

-1.5%

10.00

EUR

Euro-zone Consumer Price Index

High

0.8%

0.8%

10.00

EUR

Euro-zone Unemployment Rate

Medium

12.0%

12.0%

13.30

USD

Gross Domestic Product Q4

High

2.5%

3.2%

14.55

USD

U. of Michigan Confidence

Medium

81.2

81.2

 

 

TECHNICAL ANALYSIS & LEVELS

EUR/USD

GBP/USD

FTSE 100

Gold

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