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Financial Markets Mixed After Testimony by Janet Yellen

The first day of Janet Yellen speaking in Congress left financial markets mixed. US indices now seem more cheerful, specifically SP500 retreated to the upper border of a narrow channel at the 2450-point area. The US Dollar Index, in contrast, is on the back foot. It is being traded near the 96-point level.

However, the yen benefited from Yellen's cautious remarks. The Fed Chair voiced a rather conservative forecast on the country's economics and monetary policy by confirming that the regulator would be ready to raise the rate once again if the economic conditions were favourable. Any more details on the account balance did not follow. In the morning, the USD/JPY pair broke the support at 113.00 and tested the low in the 112.85 area. Now the question is, will the pair keep on falling? The answer to this may be given further on as the testimony by Yellen is set to continue today, and also following data on inflation due to be released on Friday.

The GBP/USD currency pair yesterday tested the low at 1.281, in the 50-day moving average area, but later amid statistics on the labour market the movement rapidly changed its direction to the opposite. Data on the labour market released on Wednesday showed a decrease in unemployment towards the lowest levels over the last forty-two years. It surely is a positive factor.

The Russian currency rapidly rose by 1.5% against the US dollar and almost 1.7% against the euro yesterday. The rise was triggered by indecisive comments by Yellen, which caused a decrease in the US dollar rate and added optimism to risky assets. However, it is still early to talk about a continuation of the ruble's strengthening, as the ruble has other drivers. For example, oil prices that have been decreasing today despite favourable data on crude oil inventories released yesterday by the US Department of Energy. Brent oil is being traded in the $48 per barrel area, whereas the USD/RUB currency pair keeps declining. The nearest support is at 58.

Among statistical data that were published today, Chinese data were most notable. China's trade balance was released. China posted a trade surplus of 42,77 billion USD in June, whereas exports (y/y) rose by 11.3% in June, imports (y/y) rose by 17.2% in June. Both New Zealand dollar and Australian dollar showed a positive reaction to these data.

Ivan Kapustyanskiy, equity analyst at Forex Optimum

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