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All Eyes on Janet Yellen

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All Eyes on Janet Yellen

All eyes were on Janet Yellen and her testimony in front of the congressional finance committee on the state of the US economy. Most investors are familiar with Yellen as she helped devise the Fed’s current strategy. Yields continue to edge higher and remain close to the 2.70% level after dipping below 2.60% right before the release of last week employment report.

Speaking officially for the first time since becoming the Chair of the Federal Reserve it is unlikely that Yellen would use the semi-annual testimony to introduce new policy. Yellen can be expected to point to the continued recovery of the US economy, despite the current soft patch due primarily to transitory issues such as weather. She will defend the gradual tapering path Bernanke outlined in December. Forward guidance will likely be underscored, which is important given the proximity of the 6.5% unemployment threshold.

Yellen is unlikely to be questioned at length about why the Fed statement did not recognize the emerging market turmoil, or the transitory headwinds created by the polar vortex that covered most of the US. If prodded, Yellen will likely explain that the main headwinds to US growth are internal and that emerging markets, especially the ones were the volatility is the greatest, like Argentina.

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The EURUSD moved above trend line resistance created by connected the highs in December to the highs in January. Support is seen near the 10-day moving average near 1.3580. Momentum on the currency pair is robust with the MACD (moving average convergence divergence) index generating a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The RSI is moving higher with price action printing near 56 which is in the middle of the neutral range.

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