NEW YORK (TheStreet) -- With Federal Reserve Chairman Ben Bernanke's testimony fast approaching, markets continue to look for an edge in figuring out what the Fed will do next.Trading on Tuesday signaled that investors believe Bernanke will reiterate his commitment to helping the economy, which is bullish for riskier assets. Since late May, global markets have questioned central bank commitment to aiding economies, which led to heightened volatility. Any form of clarity on Wednesday over continuing bond purchases will settle traders and should boost equities and commodity-linked currencies. The first chart below is of DB USD Index Bullish ( UUP) over CurrencyShares Japanese Yen Trust ( FXY). This pair measures risk aversion in world markets. The yen is a safe-haven currency, and experiences a rush of demand when fear enters markets. The Japanese currency has seen immense strength as investors fled riskier assets for fear of tapered easing in both Japan and the U.S. As the pair reaches yearly lows, there looks to be a level of support underneath. Again clarity over the situation in the U.S. should bolster this pair, and because Bernanke is unlikely to remove all support for the economy just yet, investors should be more willing to invest in riskier assets after his testimony.
U.S. economic data continue to improve, albeit gradually. If the Fed continues with its easy policy, then cyclical stocks will benefit from both a strengthening economy and central bank support. This pair is trading in a tight triangle pattern near its 52-week high. Technically this pair is primed to outperform the market as long as macroeconomic fundamentals stay in place.
At the time of publication the author had no position in any of the stocks mentioned. Follow @AndrewSachais This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.