A slow day on currency markets yesterday and overnight has seen the recent volatility of the past few days take a bit of a back seat as the US dollar slips back from its recent highs on firmer commodity prices and some profit-taking ahead of this week’s key note speech by Federal Reserve President Bernanke to Congress on Wednesday.

Bernanke is expected to reiterate the Fed’s determination to key rates low for as long as necessary, despite last weeks decision to raise the discount rate.
Concerns about sovereign debt have also eased a little amid speculation that the Dubai government is providing some support for Dubai World, but this news wasn’t exactly new.

This afternoon’s Case Shiller House Price index data and consumer confidence figures for February are also expected to show declines relative to previous months and highlight the continued fragility of US economy and thus underscore the continued low rate policy.

EURUSD – the Euro continues to trade sideways just above its 9 month lows as it pauses for breath after its recent declines. For the moment it seems to be finding some level of resistance around the 1.3650/60 area. A break here could well signal a move towards 1.3750 but while below expect the single currency to drift back towards last weeks lows.

GBPUSD – the rebound of Fridays lows of 1.5350 has come back and looks to re-testing the resistance around 1.5530/40. A break above here could well target an over spill towards 1.5630, but overall the emphasis remains on the downside continuing. The next target remains around the 1.5270 level initially, which is a 50% retracement of the up move from last years lows at 1.3500 to the highs at 1.7045, and then trend line support from the 1.3500 lows, at 1.5155/60.

EURGBP – recent poor UK data has continued to hang over the Euro sterling cross as it sits near to its recent highs, just below the 0.8800 level near to the key obstacle to further Euro gains, the 200 day moving average at 0.8822. A break and close above the 0.8820/30 area could signal further Euro gains, and break the recent downside pressure that the Euro has been under, and signal a move towards trend line resistance above 0.8900. However, while below this important level downside pressure predominates.

USDJPY – the failure to break above the 200 day moving average at 92.25 has resulted in a pullback towards the 90.80 support. A break of this key level remains the obstacle to further dollar gains here and a test of the January highs at 93.75. However while below the 200 day average the risk for a re-test towards 90.80 and a move back below 90.00 remains.