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.
In single shares, Saxo Bank head of equity strategy Peter Garnry recommends keeping an eye on Sky post- the London open as US media giant Comcast has upped its bid for the company to £12.50/share, 16% up from rival Fox's current bid.
Also noting the broad market pause ahead of Powell's testimony, Garnry reports that the Nikkei 225 pulled ahead overnight led by technology firms and automakers, adding that retail shares have been the best performing sector over the past month.
"Despite this we recommend and underweight or short stance on retail as valuations remain very expensive," says Saxo's equities head.
Looking at the macro data, Garnry says that the US releases have grown increasingly mixed of late with the most recent Dallas Fed manufacturing release coming in ahead of expectations while new home sales disappointed.
For more on equities and technical analysis of some key forex pairs, watch today's Morning Call in full.