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GBPUSD posted a red day on Monday, while after the sharp upward rally ended the day below its opening level. The price struggles within the 20 and 40 simple moving averages in the daily timeframe and the short-term technical indicators are bearish and point to more weakness in the market.

Looking at the daily timeframe, the Relative Strength Index (RSI) is moving in the positive territory near the 50 level but is flattening. Also, the MACD oscillator is falling below its trigger line, however, is still holding above the zero line.

If price continues the downside retracement and extends its losses, it could open the door for the 1.3800 strong psychological level, which overlaps with the 23.6% Fibonacci retracement level of the upleg from 1.2100 to 1.4345. If there is a fall below the latter level, there would be scope to test the next immediate support of 1.3660.

Conversely, if cable penetrates the 20-day SMA, it could then move towards the 1.4150 resistance level, taken from the peak on February 16. A break above the aforementioned obstacle could take the price towards the 1.4280 resistance barrier.

Here are the latest developments in global markets:

FOREX: The dollar index was down by around 0.15% as market attention was firmly on Fed chief Jerome Powell's testimony before Congress.

STOCKS: The Japanese Nikkei 225 and Topix indices rallied to finish the day higher by 1.1% and 0.9% respectively, pushing Japanese equities to their highest in three weeks. Hong Kong's Hang Seng, however, traded lower by 0.8%. At 0810 GMT, futures tracking the major European indices were broadly in the green, though not by much. Futures on the Dow, S&P 500 and Nasdaq 100 were all down by around 0.1%, after yesterday's strong equity performance in the US that saw the Dow, S&P 500 and Nasdaq Composite all rise by more than 1%.

COMMODITIES: WTI and Brent crude were down by 0.25% and 0.2%, at $63.77 and $67.39 per barrel respectively ahead of today's API weekly report on US crude inventories. Gold was not much changed at $1,334 per ounce.

Major movers: Dollar eases as markets remain cautious ahead of Powell's remarks; kiwi loses ground on trade numbers

Despite the dollar's decline, the relevant index that gauges the greenback against the currencies of six major US trading partners still stood at a distance to the three-year low of 88.25 that was recorded around mid-February.

Powell's testimony could determine the US currency's short-term direction. Market participants have at the moment priced in less that three quarter percentage point interest rate hikes that the latest Fed dot plot projected. It remains to be seen whether the new Fed chief's comments will incentivize market participants to revise those expectations. In his comments on Monday, Fed Governor Randal Quarles made it clear that a sustained period of higher growth might justify higher interest rates, but not at such a pace that would act to the detriment of economic activity.

Attention is also on Thursday's release of the core personal consumption expenditures (PCE) price index for January, this being the Fed's preferred inflation measure, while revised US Q4 2017 growth figures are due on Wednesday.

Dollar/yen was 0.1% higher at 107.00. This compares to the 15-month low 105.55 from February 16. Euro/dollar was up by 0.2% at 1.2340, ahead of key eurozone data releases as well as Sunday's Italian elections – the outcome of the German SPD's vote on whether to seal a coalition deal with Chancellor Merkel's conservatives will be known on the same day. Pound/dollar traded higher by 0.15% at 1.3984 in a week with increased Brexit-related interest that will culminate with a speech by UK PM Theresa May on Britain's future relationship with the EU on Friday.

The kiwi eased versus the greenback after the country recorded its biggest monthly trade deficit in more than a decade. Kiwi/dollar was down by 0.2% at 0.7289. Aussie/dollar also traded lower, though by only 0.1% at 0.7848.

Day ahead: Powell's testimony the highlight, with eurozone business & consumer confidence surveys, German inflation, US durable goods & consumer confidence also on the agenda

The economic calendar has a number of releases that could spur positioning in the markets, however Jerome Powell's first congressional testimony is viewed as the event having the greatest capacity to lead to sharper movements, not just in currency markets, but also in fixed income and equity markets.

Of most interest out of the eurozone will be numerous surveys gauging business sentiment and consumer confidence during the month of February; all of them will be coming from the European Commission's Directorate-General for Economic and Financial Affairs and are due at 1000 GMT. Barring no exception, the surveys are anticipated to reflect a decline in February, mirroring the recent easing in the German ZEW and Ifo surveys, as well as the euro area's PMI readings.

German preliminary inflation figures for the month of February are scheduled for release at 1300 GMT. These come a day ahead of the eurozone's respective figures, which would constitute the last inflation input ahead of the ECB meeting on March 8 and thus the markets might assign a larger weight on them than would otherwise be the case.

Out of the US, durable goods orders for January are due at 1330 GMT, with a reduction in orders being projected relative to December. At 1400 GMT, the CaseShiller indices gauging house prices during the month of December will be made public, while data on consumer confidence for the month of February will be released at 1500 GMT. The consumer confidence index is expected to rise to 126.6, coming closer to November's 18-year high of 128.6.

However, the data might lose their spark on the face of Jerome Powell's first monetary policy testimony before Congress set to take place at 1500 GMT. The hearing comes at a sensitive time following increasing volatility in equity markets. Invariably, the new Fed chief aims at avoiding to say something that would unsettle markets, and it is likely that Powell would not deviate from this. His speech will be release earlier (at 1330 GMT). Another hearing in Congress featuring Powell is on the agenda on Thursday.

Swedish central bank First Deputy Governor Kerstin af Jocknick will be holding an opening speech at the exhibition titled “Sveriges Riksbank 350 years old – from banknote ban to negative interest rates” at 0900 GMT. Fellow Riksbank Deputy Governor Henry Ohlsson will be discussing the Swedish central bank's tasks and his view of Swedish and international economic developments at 1700 GMT.

Oil traders will be paying attention to the API's weekly data on crude stocks due at 2130 GMT.

In equities, corporations continue to release quarterly earnings reports, though the markets' focus is expected to be on what Powell has to say later on Tuesday.

Brexit developments are also gathering attention as UK PM Theresa May prepares to deliver a speech on the nation's relationship with the EU after Brexit later in the week. In politics, NAFTA negotiations, which have entered their seventh and final round, will also be attracting interest.

Technical Analysis: Gold looking neutral in short-term; bullish signal by stochastics in very short-term

Gold has to a significant extent been moving sideways over the last trading days, with the RSI hovering around the 50-neutral perceived level and projecting a neutral picture in the short-term. However, the stochastics are giving a bullish signal in the very short-term as the %K line has crossed above the slow %D one and both lines are heading higher.

A catalyst driving the US currency higher – for example a comment by new Fed chief J. Powell that is perceived as dollar-supportive by markets – is expected to lead to weakness in the dollar-denominated precious metal, with the area around the current level of the 50-day moving average at 1,322.39 potentially acting as support. This area also encapsulates the 38.2% Fibonacci retracement level of the December 12 to January 25 upleg at 1,316.29.

A weaker greenback on the other hand, could lend support to gold. In this scenario, resistance might come around the 23.6% Fibonacci point at 1,335.25. Price action is at the moment taking place not far below this level; stronger bullish movement would start to increasingly shift attention to late January's one-and-a-half-year high of 1,365.89.

Lastly, it should be mentioned that there are other risk events throughout the week that could keep the safe-haven perceived yellow metal elevated, even in the face of a stronger dollar; Brexit developments, Italian elections, the German SPD's decision on whether to re-enter a collation with Chancellor Merkel's conservative bloc.

The pair is trades within narrow range around 107 handle on Tuesday, awaiting Powell’s testimony for fresh signals.

Strong downside rejection on Monday (106.37) left long-tailed daily candle which suggests that fresh attempts above 107.00 cannot be ruled out.

Bullishly aligned near-term techs support the notion, but sustained break above 107.00 and regain of 107.31 (Fibo 61.8% of 107.90/106.37 downleg) is needed to confirm scenario and expose key barriers at 108 zone (21 Jan high / falling 20SMA).

Broken daily 10SMA (106.86) offers initial support and holds today’s action, keeping near-term bullish bias in play.

However, daily studies remain in firm bearish setup and maintain downside risk which could intensify on return and close below 10SMA.

Res: 107.19, 107.31, 107.54, 107.90
Sup: 106.86, 106.37, 106.10, 105.54

Cable holds within tight range on Tuesday, capped at 1.40 barrier, following strong upside rejection at 1.4067 yesterday and close below 1.40, which left bearish daily candle with long upper shadow that weighs on today's action. Daily MA's are in neutral setup but momentum studies are positive, keep in play hopes for fresh attempts through 1.40 pivot (psychological barrier/50% of 1.4144/1.3856/daily Tenkan-sen) which repeatedly capped upside attempts in past few sessions. Firm break here would generate bullish signal for further retracement of 1.4144/1.3856 downleg, while repeated failure would keep the downside vulnerable. Return below Monday's low at 1.3928 would soften near-term structure and risk return to 1.3856 (low of 22 Feb). With no events from the UK scheduled today, focus will turn towards a number of data from the US and the speech of Fed Chairman Powell.

Res: 1.4000, 1.4034, 1.4067, 1.4100
Sup: 1.3952, 1.3928, 1.3904, 1.3856

The Euro stands at the front foot in early European trading on Tuesday, as dollar eases ahead of key event today, the testimony of Fed Chairman Powell. Fresh strength pressures again the top of 1.2260/1.2360 congestion which extends into fifth day, following strong rejection at 1.2355 yesterday. The resistance is reinforced by 30SMA (currently at 1.2347) and converged 10/20SMA's (1.2359/67) with sustained break here needed to generate initial bullish signal. At the downside, range floor at 1.2260 marks initial support which guards pivots at 1.2205/1.2173 (09 Feb low / Fibo 38.2% of 1.1553/1.2555 ascend) loss of which will be bearish. Powell's speech today is highly anticipated as traders are looking for fresh signals about the pace of US monetary policy tightening, which could be boosted on more hawkish tone from Powell. On the other side, a number of market participants expect milder tone from Fed chief, who will be probably optimistic on the economic outlook, but would require more patience on inflation growth which moves with lower than expected pace towards central bank's projected level. Overall expectations see balanced view from Powell which wouldn't provide stronger direction signal for the dollar if that turns to be the case. Any stronger hawkish steer from Fed today would boost dollar and risk deeper pullback of EURUSD pair from recent double-top at 1.2537/55. Conversely, dovish stance would depress dollar and risk return to its new three-year low. The Euro also faces several releases of important economic indicators this week, along with political events, Italian election and decision of leading political parties in Germany about coalition deal which would help Angela Merkel to secure a fourth term as chancellor.

Res: 1.2346, 1.2360, 1.2372, 1.2407
Sup: 1.2308, 1.2277, 1.2260, 1.2205

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.