Daily Report: Dollar Range Bound After Bernanke

Stock markets were rather quiet overnight during the first day of Fed chairman's semi annual testimony to Congress. DOW was stuck in a tight 64pt range and ended mildly up by 18.7pts. Some volatility was seen treasuries though, with 10 year yield dipping to as low as 2.461% before recovering to close at 2.491%, back below 2.5% mark. Gold failed to take out 1300 level and is back below 1280 for the moment. Dollar index struggled in tight range around 55 days EMA at around 82.7. In the currency markets, EUR/USD is still holding in established range below 1.3206 as dollar remained generally in consolidation. Though, Sterling stayed firm as lifted by BoE minutes released yesterday.

Fed chairman Bernanke emphasized that the plan on tapering stimulus "are by no means on a preset course" and Fed will be "responding to data". Fed would taper more quickly if data are stronger and could delay the process or even increase the purchase if data are bad. Also, some what more importantly, that's not only dependent on job data, but would also be dependent on growth, inflation as well as financial conditions. Meanwhile, he tried to clarify the differences between tapering of asset purchase and providing accommodative monetary policy. he reiterated that "with unemployment still high and declining only gradually, and with inflation running below the Committee's longer-run objective, a highly accommodative monetary policy will remain appropriate for the foreseeable future." But he emphasized that Fed is relying on near-zero rates and the forward guidance to "maintain a high degree of monetary accommodation for an extended period after asset purchases end."

Fed also released the Beige Book economic report. It noted that economic activity expanded as a "modest to moderate pace" in recent weeks. Manufacturing increased in most districts, consumer spending also increased generally across all districts. Residential real estate and construction activity increased at a moderate to strong pace in all reporting districts. Financial services conditions were steady to improved across all districts. Meanwhile, labor market held steady or improved at moderate pace in most districts. Price pressure was stable or modest across districts. There reported suggested uniform improvements in US and pointed to better growth in the second half of 2013.

On the data front, Australia conference board leading indicator was flat in May, NAB business confidence dropped to -1 in Q2. Swiss trade balance, Eurozone current account, UK retail sales will be released in European session. US jobless claims, Philly Fed survey and leading indicators will be featured in US session. Bernanke will also have his second day of testimony.