Markets pause ahead of Powell testimony

Federal Reserve chair Jerome Powell's testimony to a US House Committee is the key risk event today and USD pairs have largely entered into "holding patterns" ahead of the release, says Saxo Bank head of forex strategy John Hardy.

"The markets expect a focus on stimulus effects, financial stability, and inflation, and if Powell plots a stay-the-course path regarding these factors, the USD could be impacted," says Hardy.

"I suspect, however, that Powell expects a bit more leeway to conduct policy than was seen in the Bernanke/Yellen era, and a departure from this sort of hand-holding forward guidance could prove dollar-positive and risk sentiment-negative," adds Saxo's FX chief.

The risk barometer, of course, is crucial for equities which remain in recovery mode following the early February volatility shock. In Saxo Bank technical analyst Kim Cramer Larsson's view, the charts indicate that new highs are likely over the next for days for the Nasdaq Composite while 2,800 is the key level to watch for the S&P 500.

"The S&P 500 has broken resistance and the next key level is 2,800 — we remain in bullish territory above 2,700," says Larsson, adding that the Relative Strength Index is testing 60 and a close above that level would likely be bullish for the benchmark US index.