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The British pound has declined sharply against the greenback, after earlier hitting 1.4070, following a rebound in the U.S dollar index and a lack of progress with Brexit negotiations between the UK and EU. The GBPUSD pair currently trades around the 1.3960 region, after earlier finding strong support from the 1.3928 technical level. Sterling traders now await a clear break of the 1.3928 to 1.4008 price-range, as the pair searches for direction ahead of new Fed Chair Jerome Powell’s semi-annual testimony before U.S Congress later today.

The GBPUSD pair is bearish whilst trading below the key 1.4008 level, further losses towards the 1.3938 and 1.3901 levels seem possible.

Should GBPUSD price-action break above the 1.4008 level, further advancement towards the 1.4070 and 1.4144 resistance levels appear likely.

The euro is consolidating around the pivotal 1.2321 level against the U.S dollar, as investors remain cautious ahead of a series of key market risk events on Tuesday. The EURUSD pair earlier found strong resistance from the 1.2351 level, whilst dipped buyers again defended the crucial 1.2292 support level. Traders now look towards monthly CPI inflation figures from the German economy, U.S Durable Goods Orders and Federal Reserve Chairman Jerome Powell’s testimony before U.S Congress later today.

The EURUSD pair is bullish while trading above the pivotal 1.2321 level, further upside towards the 1.2351 and 1.2390 resistance levels remains possible.

Should EURUSD price-action move below the pivotal 1.2321 level, sellers are likely to again test the 1.2292 and 1.2259 support levels.

After a moderate start to the week, investors can expect a deluge of economic reports from both sides of the Atlantic on Tuesday.

Action picks up at 07:45 GMT with a report on French consumer confidence, followed immediately by Spanish inflation numbers for February. Beginning at 09:00 GMT, Italy will report on consumer and business confidence.

The European Commission's statistical agency will also report a bevy of sentiment indicators at 10:00 GMT, including industrial confidence, economic sentiment, business climate, consumer confidence and service sentiment. The reports will be used to gauge the overall health of the euro area economy.

The most closely watched European data release will come at 13:00 GMT when Germany reports preliminary inflation numbers for the month of February. Germany's harmonized index of consumer prices (HICP) is expected to slip to 1.3% year-over-year in February, down from 1.4% the month before. When measured monthly, the HICP is expected to rise 0.6% after falling 1% in January.

Multiple reports will headline the start of New York trading, including US wholesale inventories, goods trade balance and durable goods orders. The report on durable goods will be the most closely scrutinized. Orders for manufactured goods meant to last three years or more are expected to drop 2.2% in January after rising 2.8% in December. Excluding the volatile transportation category, orders are expected to rise 0.4%.

Investors can expect a pair of reports on US housing prices at 14:00 GMT. The S7P/Case-Shiller Home Price Indices are expected to rise 6.3% year-over-year in December. A separate housing price index report from the Federal Housing Finance Agency is forecast to show 0.4% growth in December.

Rounding out the data wire is the Richmond Fed Manufacturing Index, which is set for release at 15:00 GMT.

In terms of monetary policy, investors will be keen to monitor Jerome Powell's first congressional testimony as Chairman of the Federal Reserve. The testimony will begin at 13:30 GMT.

EUR/USD

Europe's common currency strengthened on Monday, as the dollar drifted sideways ahead of a data-filled week. The EUR/USD reached a high of 1.2344, where it faced stiff resistance. The pair was last seen trading at 1.2325. The economic data could dictate the pair's trajectory in the coming days.

GBP/USD

Cable had a volatile start to the week, with prices climbing to 1.4062 before falling 100 pips to the 1.3960 region. The GBP/USD was last seen trading at those levels, with investors eyeing strong technical resistance in the 1.4050-1.4075 region.

USD/CAD

The USD/CAD also fluctuated on Monday. After an initial drop, the pair quickly regained its poise to settle in the 1.2680 region. The pair faces immediate resistance at the 1.2723 level, which represents the high from 23 February.

XAUUSD (1332.39): Gold prices rallied briefly towards 1338 level but failed to close higher on the day. As price retreated, the consolidation over the past few days could trigger a downside breakout as long as the established resistance at 1338 is not breached. The initial target to the downside remains at 1303 level. Further declines could be expected as gold prices could likely touchdown to the 1282 - 1274 region of main support that is yet to be tested. In the event that gold prices manage to close above 1338, then the bias shifts to the upside with the next upside target seen at 1357.

GBPUSD (1.3953): The British pound closed bearish yesterday despite intraday attempts to push higher. However, with price still trading above the 1.3902 level of support, we expect to see some upside bounce in price. A break down below 1.3902 is required to confirm the decline towards 1.3530. On the 4-hour chart, GBPUSD remains trading within the triangle pattern. We expect price to touch down to the initial support at 1.3902. A break down below this level could validate the downside breakout in the triangle pattern as price action could be seen targeting 1.3530 level.

EURUSD (1.2321): The EURUSD attempted to rally to intraday highs but price action was seen closing lower on the day off the highs. On the 4-hour chart, we see the bearish flag pattern being formed, right below the main resistance level where the EURUSD has been consolidating. A break down below the base at 1.2260 could signal further declines targeting 1.2074. Alternately, EURUSD will need to close strongly above the resistance level in order to invalidate the downside bias. However, in this scenario, we still expect to see consolidation taking place unless the EURUSD manages to post fresh highs.

The U.S. dollar managed to hold its ground on Monday as investors brace for Fed Chair, Powell's semi-annual testimony to Congress later today. Although Powell hasn't yet officially chaired any FOMC meetings, his testimony could be seen as a major indicator of how monetary policy will be steered under his governance.

On the economic front, Mario Draghi gave his testimony to the European parliament on Monday. No major references were made to monetary policy. He however said that the central bank needs to remain patient with inflation. In the U.S. new home sales data showed a decline as home sales rose only 593k missing estimates of 655k.

Looking ahead, the economic calendar today is busy. The U.S. durable goods orders data will be coming out and forecasts point to a decline on the headline print. Germany and Spain will be releasing the flash inflation readings while Canada will be releasing its annual budget plans.

Sunrise Market Commentary

• Rates: Powell to confirm Fed's path to policy normalization
  Over the previous days, core bonds staged a cautious technical rebound as investors were looking forward to today's hearing of Fed's Powell before Congress. We expect the Fed chairman to hold a positive tone on the US economy, in line with the previous Fed minutes. If so, it probably doesn't leave that much room for further gains of US Treasuries.
• Currencies: Will Powell give the dollar some downside protection
  Yesterday, the dollar hovered up and down as investors awaited today's hearing of Fed's Powell on Capitol Hill. Will the Fed chairman signal a big enough Fed engagement on policy normalization to provide the USD some downside protection. UK labour leader Corbyn's preference for the UK to stay in a customs union with the EU doesn't help sterling for now

The Sunrise Headlines

• US equity markets started the week on a strong footing, extending the rally from the end of last week. Major US indices closed 1.15% (Nasdaq) to 1.58% (Dow) higher. Asian markets join the rebound from the US. China underperforms, trading in negative territory.
• At the last policy meeting of Governor Lee Ju-yeol, the Bank of Korea kept its policy rate unchanged. Lee said that the BoK was not obliged to follow a global withdrawal of stimulus. The Bank of Korea is expected to tighten policy only in a gradual way after its hike to 1.50% in November.
• The EU is said to publish a draft Brexit treaty on Wednesday in which it will set out in legal detail how it expects the U.K. to depart from the EU and the terms of a transition period that will follow, according to sources. The report probably won't meet the UK's demand on several key issues.
• According to Bloomberg, Apple is preparing to release a trio of new smartphones later this year: the largest iPhone ever, an upgraded handset the same size as the current iPhone X and a less expensive model with some of the flagship phone's key features. With the new line-up, Apple wants to appeal to consumers who crave the multitasking attributes of so-called phablets while also catering to those looking for a more affordable version of the iPhone X..
• Today's eco calendar is heavily packed containing, amongst others, German CPI data, EMU economic confidence and money supply data. In the US, the advance goods trade balance, US inventory data, durable goods orders, Housing data, the Richmond Fed manufacturing index and Consumer confidence (Conference Board) will be published. ECB's Merch and Weidmann are scheduled to speak. The focus of markets will be on the hearing of Fed Chairman Powell before the House Financial Services Committee

Currencies: Will Powell Give USD Some Downside Protection

Will Powell give USD some downside protection

The dollar started the week on a soft footing, but gradually received a better bid later in the session despite soft comments from Fed's Bullard. (FX) Markets were looking forward to today's hearing of Fed Chairman Powell on the Hill and to plenty of eco data scheduled later this week. Investors apparently didn't want to be too much short dollar going into these events. USD/JPY rebounded back to the high 106/low 107 area. EUR/USD reversed early gains and returned to the 1.23 area.

This morning, Asian equities join the rally from WS, with China underperforming. The dollar is losing a few ticks against the euro (EUR/USD currently 1.2330) and the yen (USD/JPY currently 106.85).

Today, there are plenty of data including German CPI, the US goods trade balance, durable goods orders and consumer confidence. However, the data will likely be overshadowed by the first semi-annual hearing of Fed Chairman Powell before the House financial services Committee. His testimony will probably be balanced. Even so, he will likely confirm that solid US growth requires further normalization of monetary policy. In the end, his message might be (mildly) USD supportive. Soft German inflation data might be a slightly negative for the euro. Of late,; we advocated some further consolidation of EUR/USD in the 1.25/1.2165 consolidation pattern. We maintain that view for now. We look out whether a positive assessment of Powell on the US economy and markets anticipating further US policy normalization might cause EUR/USD to go for a test of the 1.2165/1.2206 range bottom.

Yesterday, sterling initially profited from hawkish comments from BoE's Ramsden this weekend and from UK Labour Party leader Corbyn supporting the case for the UK to enter a customs union with the EU after Brexit. However, for now his approach doesn't break the UK political stalemate on Brexit. Sterling returned earlier gains. EUR/GBP rebounded north of 0.88. Today, there are no UK eco data. However, headlines suggest more headwinds from the EU to the Brexit agenda of the UK government. Over the previous days, sterling received a slightly better bid, but the move had no strong momentum. For now, the 0.8690 range bottom still looks a very solid support/GBP resistance

EUR/USD: dollar going nowhere. Will Powell provide the clue for a next directional move?

Download entire Sunrise Market Commentary

USDCHF and EURUSD are negatively correlated, which means if one makes a turn and goes higher, the other one will likely turn lower at the same time.

We see USDCHF. which can also be trading in a flat correction as EURUSD, but in a reversed one. We see recovery from 0.9256 as sub-wave a, followed by a sharp drop as b and now rally from the lows indicates that maybe blue wave c of 4 can be in progress. As such price can rally towards the 0.9473 level, before final drop lower comes in play as black wave 5 of C).

USDCHF, 4H

EURUSD, 4H

Currency pair EUR/USD

The EUR/USD has failed to break below the support trend line (blue), which could indicate a potential bullish reversal to test the previous tops (red line). A break below the previous bottom (green) would make a wave 4 (purple) pattern less likely.

The EUR/USD needs to break above the resistance trend line (orange) fora bullish breakout towards the Fib targets of wave 3 (blue). A strong bearish turn at 1.2475-1.25 could indicate that price has built an ABC rather than a 123.

Currency pair GBP/USD

The GBP/USD failed to break above the resistance trend line (red) and remains in a triangle chart pattern. Price will need to break the S&R before a new trend becomes visible.

The GBP/USD is broke below the support trend line (dotted green) and could be building a bearish ABC (orange) zigzag within a larger WXY correction (grey) unless price manages to break above resistance (red).

Currency pair USD/JPY

The USD/JPY could make one more lower low within wave 5 (green) if price manages to break below the support trend line (blue).

The USD/JPY bullish breakout would probably invalidate wave 4 (orange) whereas a bearish break could indicate a downtrend continuation.