Firstly, market participants would be closely watching Janet Yellen's semi-annual testimony on the economy and monetary policy. The macro call on U.S. yields, the dollar and the euro/dollar exchange rate has been one of the most frustrating directional calls of this year. On the back of U.S. Federal Reserve tapering its QE programme, one would have expected U.S. yields to rise towards 3 percent, the dollar index to push higher and the euro to correct towards the 1.3 level against the dollar. But the Federal Reserve's reluctance to even remotely talk about rate hikes and keeping a dovish stance has led to the U.S. 10 year yields stuck near 2.5 percent, the dollar index hovering around 80 and the euro trading above 1.35 to the dollar even on the back of ECB president saying that QE is on the cards.

Based on the FOMC minutes in June, the Federal Reserve was optimistic about the outlook for the U.S. economy (they plan to end QE by October assuming the current magnitude of tapering is maintained) but refuses to provide a clear timing on tightening. Bond, equity and foreign exchange traders want to know when the Fed will start raising interest rates so rest assured, members of Congress will pepper her with questions about tightening according to currency guru Kathy Lien. Janet Yellen has maintained that the labour market recovery could be stronger and the Fed will not turn hawkish until she is satisfied with the wage data. It is in the central bank's interest to give the market an opportunity to react to the end of QE before signaling a plan to raise rates. If bond yields spike after QE ends (much like in 1994 - a situation which the Fed intends to avoid) with a sell-off in equities, Yellen will probably have to delay the first rate hike which is currently being priced in for mid-2015. It is in the central bank's interest to clearly draw a roadmap, and more importantly communicate that with the financial markets to avoid volatile moves across asset classes as we approach the end of the QE taper. U.S. retail sales are also expected to rebound, lending support to the dollar. The earnings season also kicks off with heavyweights such as JP Morgan, Goldman Sachs, Google and General Electric reporting earnings.

Without any domestic trigger for Indian equities, all eyes will be on the Fed and the impact on U.S. yields and the dollar.

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