In his debut testimony before Congress yesterday, Fed’s new governor Jerome Powell, supported the argument for a stronger economy. Specifically, he cited possible increased budget spending and increased wages from a possible increase of productivity as main factors for a stronger economy. There were also hints for an increased number of rate hikes as well as an unwinding of the Feds balance sheet. Having said that, we would like to add that the new governor made a good impression in his debut appearance, as some analysts noted. The USD reacted positively to the testimony and we see the case for the positive effect to continue in the next few days. Please be advised that there will be another hearing of Powell tomorrow.
EUR/USD dropped yesterday, breaking the 1.2230 support level. We see the case for the pair to trade in a sideways manner with some bearish tones based on the before mentioned fundamental news and financial data which are to be released during the day. Should the bears take the driver’s seat, we could see the pair aiming and even breaching the 1.2100 support line. Should the bulls take the reins, we could see the pair breaking the 1.2230 resistance level and aim for the 1.2355 resistance zone.