Euro Advances Against Majors; Fed Chairman Ben Bernanke's Testimony In Focus

The European currency strengthened against other major currencies in Asian morning deals on Wednesday as investor sentiment improved following comments from Fed officials that eased concerns about the central bank paring back its asset purchase program.

 While speaking at Frankfurt on Tuesday, St. Louis Fed President James Bullard said quantitative easing has been the most reliable tool while interest rates have been near zero and said the Fed should continue with the program.

 Bullard still noted that the rate of purchases should be adjusted appropriately in view of incoming data on both real economic performance and inflation. 

New York Fed President William Dudley delivered a separate speech in New York questioning whether the adjustment to the pace of purchases would be up or down. 

Focus now shift towards Federal Reserve Chairman Ben Bernanke's testimony before the Joint Economic Committee of Congress at 10:00 am ET.

 Bernanke's remarks are closely watched as it will provide further clues about the Fed's plans to slow the pace of its asset purchase program. 

The euro advanced to a weekly high of 1.2938 against the greenback, up from Tuesday's close of 1.2904. If the euro extends gain, it may breach 1.31 level. The euro appreciated to 1.2533 against the franc for the first time since January 18. This may be compared to Tuesday's close of 1.2528.

 On the upside, the euro-franc pair may breach 1.26 level. The single currency spiked up to a 4-week high of 0.8528 against the pound, after having fallen to a 4-day low of 0.8438 on Tuesday.

 Further extension of the euro-pound pair may see it breaking resistance area around 0.86 level.

 The euro area currency climbed to an 8-day high of 132.67 against the yen and further uptrend for the euro-yen pair will help to reach its highest level in more than 3 years. 

The euro may eye next upside target level around 135.00. Japan saw a merchandise trade deficit of 879.936 billion yen in April, the Ministry of Finance said today. 

That missed forecasts for a shortfall of 620.6 billion yen following the downwardly revised deficit of 364.0 billion yen in March.

 The 17-nation currency approached a 5-day high of 1.3211 against the aussie, recovering from yesterday's multi-day low of 1.3104. 

The euro may seek next upside target level around 1.33. The euro that ended Tuesday's deals at 1.3250 against the loonie and 1.5791 against the NZ dollar reached as high as 1.3274 and 1.5850, respectively. 

On the upside, the euro may break 1.335 against the loonie and 1.596 against the kiwi. The Bank of Japan's interest rate decision is due shortly.

 The central bank is forecast to keep interest rates unchanged at 0.10 percent. 

The Bank of England's minutes of May 9 meeting, U.K. retail sales and public sector net borrowing for April are due in the European session. 

Canada retail sales for March and U.S. existing home sales for April will come out in the New York session. 

The Fed will release the minutes of its April 30-May 1 policy meeting at 2:00 pm ET.