Talking Points:

- Fed Chair Yellen gives testiomony at 15:00 GMT today.

- USDOLLAR Index barely holding above 12035.

- As market volatility rises, it's a good time to review the "Traits of Successful Traders" series.

The USDOLLAR Index continues to flirt with a major support region around 12035 as the rally around Friday's US NFP report has all but fizzled out. Momentum indicators (daily MACD and Slow Stochastics) have continued to press lower into bearish territory, and price is now treating the daily 8-EMA as trend resistance after Monday's failed rally.

The technical nature of the USDOLLAR Index is particularly important to weigh when considering the potential impact of Fed Chair Janet Yellen's testiomony today. We're in the midst of a negative news cycle, one that has sucked in the US Dollar via reduced expectations for tighter Fed policy this year. There have been two diametrically opposing views: that the Fed is right in its projected policy path and should remain confident; or that the Fed is wrong and needs to be paying closer attention to financial market developments both at home and abroad.

It seems, then, that Chair Yellen has the opportunity to serve as the last line of defense for the USDOLLAR Index, at a time when the technical picture is eroding so quickly. Likewise, EUR/USD continues to exhibit a breakout retest in the form of a bull flag on its H4 timeframe that's aiming for $1.1450/1.1530; USD/JPY appears to be triggering (weekly close to confirm given time scale of move) a head & shoulders topping pattern that points towards ¥106.00/25.

See the above video for a deeper discussion on Fed Chair Yellen's testimony and for technical considerations in EUR/USD, GBP/USD, AUD/USD, USD/JPY, USD/CAD, and the USDOLLAR Index.

Read more: EUR/USD, USD/JPY Hint at Ugly Potential for USDOLLAR Index

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com.

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