Powell's congressional testimony is coming! The dollar index is approaching its 200-day moving average

On March 6, important data or events may trigger market volatility, and the dollar is facing a critical moment. Federal Reserve Chairperson Powell is about to testify to Congress, which is crucial. He is expected to update monetary policy, and the market hopes to get hints about interest rate cuts and a soft landing. Technical analyst James Hyerczyk recently wrote an article on the trend of major currencies, providing a forward-looking analysis of the dollar index, EUR/USD, GBP/USD, as well as USD/JPY, and the market outlook. The following are the main points of the article.

On Wednesday (March 6), important data or events may trigger market volatility, and the dollar faces a critical moment. Federal Reserve Chairperson Powell's upcoming testimony to Congress is crucial. He is expected to update monetary policy, and the market hopes for hints about interest rate cuts and a soft landing.

Technical analyst James Hyerczyk recently wrote an article on the trend of major currenciesDollar index, EUR/USD, GBP/USD, and USD/JPY, the market outlook for forward-looking analysis. The following are the main points of the article:

dollar

(Dollar index 4-hour chart)

The dollar was on top of a key technical pivot on Tuesday as ISM data showed inflationary pressures easing and U.S. Treasury yields were lower. The dollar index has rallied 2.4 percent this year but has recently stalled as investors await clarity on Federal Reserve policy. Chairperson Powell is expected to highlight the Fed's data-dependent stance during his congressional testimony this week. Friday's jobs data could sway markets. Most currency pairs traded cautiously, leading to the G10foreign exchange marketThe situation is sluggish. Market participants are still hesitant ahead of this week's major events.

Technically, the dollar index is weak after crossing the bearish side of the 200-day moving average of 103.735, which is new resistance. However, Tuesday's price action suggests that this level could be a near-term pivot.

EUR/USD

(EUR/USD 4-hour chart)

EUR/USD rose on Tuesday ahead of major events such as the European Central Bank's interest rate decision and Powell's testimony. EUR/USD is currently up 0.17%.

The European Central Bank met on Thursday and is likely to maintain a record interest rate of 4 percent. Investors look for clues to a potential rate cut and scrutinize economic forecasts. Recent survey data showed that business activity in the euro zone rebounded last month, adding to optimism.

The EUR/USD trended higher on Tuesday after breaking through multiple previous highs and surpassing the 50-day moving average of 1.0866. A sustained break through this level could push the single currency into the main top of 1.0898 on February 2. The long-term support is at the 200-day moving average of 1.0828.

GBP/USD

(GBP/USD 4-hour chart)

Sterling edged up 0.24 per cent against the dollar at 1.2720 ahead of the UK budget on Wednesday, as Finance Minister Henry Hunt sought to quell speculation of a big tax cut ahead of the election.

Technically, GBP/USD is trending upwards in 4 hours after breaking through the two-day resistance level. Momentum traders are targeting the main top on February 2 at 1.2772. On the downside, support is at the 50-day moving average at 1.2674.

USD/CAD

(USD/CAD 4-hour chart)

The Bank of Canada is expected to advocate for patience in its interest rate announcement this week, with economists expecting future rate cuts due to weak economic conditions. Forecasts show the central bank will keep its key rate at 5% on Wednesday and could cut rates around June. Despite a stronger-than-expected fourth quarter, domestic spending fell and gross domestic product growth remained weak, with economic indicators sparking caution.

From a technical standpoint, USD/CAD moved slightly lower after failing to break through the resistance range of 1.3605 to 1.3606. Sellers may now target 1.3541 in response to a potential collapse. Breaking through this level would also put the main long-term support at 1.3479 in the spotlight. This is the 200-day moving average.

USD/JPY

(USD/JPY 4-hour chart)

The USD/JPY recovered from an early decline and was trading almost flat on Tuesday, which sent the pair to its lowest level since February 29 at 149.205.

A further rise could pave the way for a peak of 151.92 last November, but it has also raised concerns about potential Japanese intervention.