Yesterday we saw equity markets consolidate the gains that we saw post payrolls on Friday, and this morning Europe is once again set to open higher. Given the positive response to what was a pretty poor headline number there may be a belief on the margins that the Fed might feel compelled to step back from what looks like a steady reduction in the pace of stimulus. When the new Fed chairwoman steps into Congress today she will no doubt be treading into the lion’s den as US lawmakers of all political persuasions ask her some searching questions about the next steps the Federal Reserve is likely to take in light of two successively weak US jobs reports. Given that the Fed has just started tapering it seems unlikely that the Fed will get cold feet at this point and Ms Yellen’s testimony is likely to reflect that, while at the same time saying that future tapering is data dependant. Markets will also be looking at how Janet Yellen deals with the some of the more disparate political elements within that chamber, given that the debt ceiling has still to be raised and that the deadline for that has now passed, and the US treasury is implementing special measures, to extend that deadline. Given that we have another six weeks and another payrolls report until the next Fed meeting it seems quite likely that Ms Yellen will reinforce comments made by other Fed officials recently that there is a high bar to pulling back from tapering, and that with an unemployment rate within a whisker of the 6.5% guidance threshold, the commitment to low rates will be reinforced. We could also find out whether the recent turmoil in emerging markets came up for discussion in the deliberations surrounding the recent decision to taper further. Just prior to Janet Yellen’s appearance in front of Congress, FOMC voting member Philadelphia Fed chief Charles Plosser is also due to speak and it seems unlikely that his comments will deviate much from what he said last week, when he said that he was in favour of a much more aggressive scaling back of stimulus, particularly if unemployment keeps falling, and he is likely to reinforce that message today, given the fall to 6.6% last week. Fears about a slowdown in UK retail sales after Christmas appear to be unfounded after the latest BRC retail sales numbers for January showed a year on year increase of 3.9%, well above expectations of a rise of 0.8%. The numbers do reinforce concerns about the balanced nature of the current recovery. EURUSD – the euro continues to edge higher towards the January highs just above the 1.3700 area, but we also have a bit of a top at 1.3650. Above 1.3700 we still have long term trend line resistance at 1.3850 from the all-time highs at 1.6040 and ultimately this remains the key obstacle to a move through 1.4000. We still have fairly strong support at the 1.3475/80 area which is currently supporting the euro. That being said the onus still remains towards the downside and a move towards 1.3300, while last month’s bearish engulfing candle on the monthly charts still remains valid. GBPUSD – the 50 day MA continues to cap the pound for the moment at 1.6420/30. A break through here has the potential to retarget the 1.6510 area. Support remains at the 1.6250 area and 100 day MA which remains the last obstacle to a drop on the 1.6000 area. EURGBP – last week’s move through 0.8330 level has so far find it difficult to push on towards the 0.8375 level and trend line resistance from last August highs. On the downside we have support at 0.8260, and below that at our previous lows at the 0.8165 level. USDJPY – last week’s rebound back above the 101.80 level shifts the focus back towards the 103.00 area. The 101.80 level should now act as support for this move to unfold. A move back below 101.80 retargets the recent lows at 100.80, and even potentially a move towards the 100.00 level and 200 day MA. CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.