The greenback relinquished some of its previous session's gains against the majors in early Wednesday trading, briefly trading below the 1.36-figure against the euro. The dollar recovered some of those earlier losses by the afternoon session as markets digested Bernanke's semi-annual testimony.

Fed Chairman Bernanke, as expected, stressed that interest rates needed to remain low for an extended period of time to support the nascent economic recovery. He added that the Federal Reserve will at some point need to begin to tighten monetary conditions to prevent the development of inflationary pressures and expressed confidence that the Fed has the tools needed to firm the stance of monetary policy at the appropriate time. Bernanke acknowledged that the sharp rise in economic growth in the second half of 2009 was attributed to the progress firms made in working down unwanted inventories of unsold goods, which left them more willing to increase production with the economy forecast to grow at 3 to 3 1/2 % in the coming year and for the unemployment rate to decline slowly.

New home sales missed estimates for an increase to 360k, instead falling by 11.2% in January to 309k units versus 342k units in December. Economic reports scheduled for Thursday will see weekly jobless claims, January durable goods orders and December home prices. Weekly jobless claims are expected to improve to 455k, down from 473k in the previous week. The headline durable goods orders are forecast to edge up to 1.5% in January compared with a 1.0% reading in December while new core goods orders are estimated to slip to 0.8% from 1.4%.

Euro Slides

The euro remains under pressure against the dollar and yen, failing to sustain gains from earlier in the session as deficit woes continue to weigh on the single currency. Economic reports from the Eurozone were mixed with Germany's Q4 GDP improving to a flat reading compared with a 2.1% contraction in the previous quarter and a 1.7% decline on an annualized basis. Industrial orders out of the Eurozone surprised to the top side, printing at 9.5% compared with a 0.5% decline previously and up by 0.8%.

EURUSD consolidates lower in a narrow band poised for a test lower in the coming sessions. A breach of the 1.35-level will likely open the floodgates for a quick test of the multi-month low at 1.3442.