US Dollar Surges as GDP Beats Ahead of Fed Meeting; USD/JPY New Highs

The US Dollar has extended its gains this morning on the back of a stronger than anticipated 2Q’13 US GDP report, alongside several other revisions that saw growth come in higher than previously reported over the past several years. The +1.7% annualized reading, in context of the now +0.1% 4Q’12 print and +1.1% 1Q’13 GDP print, shows that the US economy’s growth is accelerating despite fiscal headwinds.

Here are the key figures driving US Dollar strength ahead of the US cash equity open:

- GDP (2Q A) (Annualized): +1.7% versus +1.0% expected, from +1.1% (revised lower from +1.8%)

- Personal Consumption (2Q A): +1.8% versus +1.6% expected, from +2.3% (revised lower from +2.6%) (y/y)

- GDP Price Index (2Q A): +0.7% versus +1.0% expected, from +1.3% (revised higher from +1.2%) (y/y)

- Average GDP growth from 2009 to 2012: +2.4% (revised higher from +2.1%)

USDJPY 1-minute Chart: July 31, 2013

 

Following the release, the USDJPY, already boosted by the beat on the July ADP jobs report, rallied from ¥98.13 to as high as 98.52, a fresh session high and highest level of the week. The pair remains well-bid from just an hour earlier in the session, when the USDJPY was near the lows under 97.60.

 

Source: http://dld.bz/cKsbT

Dollar Tumbles after Fed Mouthpiece Suggests Fed Guidance Change

Dollar Tumbles after Fed Mouthpiece Suggests Fed Guidance Change

The dollar was slowly retracing the previous session’s undeserved strength Thursday when the market caught wind of a ‘Taper’ headline. Later in the US trading session, Wall Street Journal report Jon Hilsenrath – considered the unofficial mouthpiece for the Fed – released a report suggesting the Federal Reserve would keep its $85 billion-per-month stimulus program untouched next week and that they would look to ‘refine’ their ‘easy-money message’. Waking the market up from its volatility lull was worth a market-wide selloff for the dollar and a few enticing technical breakouts from pairs like USDJPY and GBPUSD. However, there is likely little more to be garnered from this newswire item than a jolt from traders asleep at the wheel. There was an exceptionally low probability that the central bank would have Tapered at its July meeting – economists and speculators that do expect it ‘soon’ expect it will happen at the September gathering. Furthermore, clarifying the message that the central bank will not raise rates for some time misses the object of the market’s focus. Interest is in the first reduction in the ongoing QE3 program as that will be the first step towards the eventual exit – and speculators are forward-looking animals.

British Pound: Why a Drop after UK 2Q GDP Hits Robust Expectations?

According to the Office for National Statistics, the United Kingdom’s economy grew 0.6 percent through the second quarter. That doubles the pace of the previous period and firmly cements a counter argument against the perpetual bears that believe the country’s competitiveness is waning and the Bank of England (BoE) will be forced to ramp up its stimulus effort. The threat of a ‘Triple Dip’ recession through the beginning of the year reinforced the belief that the central bank would have to join the Fed and BoJ to offset its counterparts’ efforts – a move that would exacerbate the weakness of the currency. Yet, we are seeing more and more evidence that those fears were overblown. If this GDP figure supports a future that doesn’t have stimulus ballooning, why has the sterling not rallied? Coming out ‘in-line’ with expectations somewhat disarms the release. Furthermore, there is likely a sense of distraction as traders look forward to the BoE rate decision next week.

Euro: Greece Moves to Ensure EU Rescue Payout Approval Friday

There were a few fundamental highlights for the euro this past session, but it didn’t seem to give Euro traders a unified bearing. Top news was the report that the Greek Parliament passed a measure that transferred several thousand public sector employees over to a ‘special labor reserve’. According to the Eurogroup head Dijsselbloem, this was the last of 22 required points of progress required from Greece to unlock the EU’s next €2.5 tranche of aid. Officials are expected to meet Friday to discuss the release having delayed it this past Wednesday. This is unlikely to prove a market-moving event unless it doesn’t go through. Meanwhile, the IMF called on the Eurozone to expand its stimulus effort and cut rates – a recommendation that will be ignored – while Spain reported a much-needed drop in the unemployment rate.

Australian Dollar Suffering as Confidence in RBA Rate Hikes BuildsIt seems that the Australian dollar is never short of a reason to have bears pummel it (New to Forex? Watch this video). While sentiment – and thereby the appetite for yield – have leveled off, the currency is finding its ‘return potential’ fade. Following on the 2Q CPI figures from earlier this week, we find participants in the rates market now see a 71 percent probability of the RBA cutting its benchmark lending rate another 25 bps to 2.50 percent on August 6. We have seen that level of certainty since October. Reflecting the Aussie dollar’s fading yield appeal, the benchmark 10-year government bond yield has shown a notable lethargy compared to others, like New Zealand. The yield shortfall of the Aussie benchmark to its New Zealand counterpart is currently 45 bps – near the widest in four years.

Japanese Yen: BoJ Seeing Success as Inflation Rises, But Not Yen Crosses…

Data is giving the Bank of Japan (BoJ) and Japanese government a needed boost of confidence. Not only have we seen improvements in business activity, trade and other economic figures; we are seeing the beginnings of sticky inflation. The Ministry of Internal Affairs released the June CPI figures to a distinctive increase in pressure. The headline figure showed 0.2 percent annual price growth for the first positive growth in 13 months. When fresh food was extracted, inflation rose 0.4 percent – the fastest pace of expansion since November 2008. Though the central bank’s target is 2.0 percent, this is encouraging for a country that has struggled with deflation for two decades. This is early evidence of a successful monetary and financial policy…but the FX market doesn’t seem impressed. Yen crosses were unmoved by the data. The level of stimulus is fixed and a return to inflation means eventual rate hikes – not good for a funding currency.

New Zealand Dollar Post-RBNZ Rally to Best Day in 13 Months

While the Reserve Bank of New Zealand’s rate decision Thursday morning didn’t rouse an immediate surge in volatility behind its benchmark currency after the release, there was a considerable consistency behind its drive as the day wore on. Through the end of New York trading, NZDUSD posted an enormous152-pip or 1.9 percent rally – the biggest notional advance since November 30, 2011and percentage climb since June 6, 2012. Where did this drive come from? While the headline from the central bank’s statement was for a hold on benchmark rates through 2013, the market is growing more certain in its outlook for an eventual rate hike. The jump in the 10-year NZ government bond yield above 4.2 percent and swaps pricing in a 56 bps worth of hikes for a 12 month period forward reflects that hawkishness.

Gold Eases Higher as Hilsenrath Revives Taper Talk, Gold Producer Suffers Low Prices

With the return of speculative murmurings about what the Federal Reserve is planning thanks to Jon Hilsenrath, gold managed to regain some traction this past session. There are two speeds at which this event risk could affect the commodity. On one hand, the market could interpret the stimulus headlines as a definitive shift in the central bank’s bearings; and the ‘alternative store of wealth’ would have found an independent drive. Such an interpretation could have carried us to new highs and towards $1,400. What we witnessed was the alternative understanding: a quiet market stirred to life by offhanded comments that don’t alter the forecast. Under this gear, the metal simply took advantage of the dollar drop – as most of its crosses did. In other news, the low price of the precious metal is hurting more than diehard bulls. Goldcorp – the largest producer of the precious metal – announced a $1.96 billion write down in its assets value through second quarter earnings numbers.

ECONOMIC DATA

GMT	Currency	Release	Survey	Previous	Comments
1:45	CNY	MNI Business Sentiment Indicator (JUL)			With HSBC PMI data disappointing on Wednesday, prospects for any improvement in Chinese data look weak.
6:45	EUR	French Consumer Confidence Indicator (JUL)	79	78	The indicator has been on the decline since August of 2012.
13:55	USD	U. of Michigan Confidence (JUL F)	84.0	83.9	The indicator has improved greatly from April’s print of 76.40.
SAT 1:30	CNY	China Industrial Profits (YTD) (YoY) (JUN)		12.3%	With speculation that balance sheets of weak companies in China are being propped up, this indicator may be one of the few positive prints out of the nation.

GMT	Currency	Upcoming Events & Speeches
1:00	AUD	Australia to Sell A$700 Mln in 10-Year Bonds
9:00	EUR	Italy to Sell Inflation Linked Bonds
-:-	EUR	EU Greece Aid Payment Decision (Delayed from Wed)

SUPPORT AND RESISTANCE LEVELS

CLASSIC SUPPORT AND RESISTANCE

EMERGING MARKETS 18:00 GMT							SCANDIES CURRENCIES 18:00 GMT
Currency	USD/MXN	USD/TRY	USD/ZAR	USD/HKD	USD/SGD		Currency	USD/SEK	USD/DKK	USD/NOK
Resist 2	13.4800	2.0000	10.7000	7.8165	1.3650		Resist 2	7.5800	5.8950	6.5135
Resist 1	13.2000	1.9500	10.2500	7.8075	1.3250		Resist 1	6.8155	5.8475	6.2660
Spot	12.8248	1.9532	9.9898	7.7565	1.2611		Spot	6.6645	5.7005	6.0533
Support 1	12.6000	1.9100	9.3700	7.7490	1.2000		Support 1	6.0800	5.6075	5.9365
Support 2	12.0000	1.6500	8.9500	7.7450	1.1800		Support 2	5.8085	5.4440	5.7400

INTRA-DAY PROBABILITY BANDS 18:00 GMT

\CCY	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	Gold
Res 3	1.3207	1.5321	100.65	0.9579	1.0466	0.9268	0.7945	131.66	1315.85
Res 2	1.3176	1.5284	100.28	0.9553	1.0444	0.9238	0.7918	131.18	1307.84
Res 1	1.3145	1.5246	99.91	0.9527	1.0422	0.9208	0.7891	130.71	1299.83
Spot	1.3084	1.5172	99.18	0.9475	1.0378	0.9149	0.7838	129.76	1283.80
Supp 1	1.3023	1.5098	98.45	0.9423	1.0334	0.9090	0.7785	128.81	1267.77
Supp 2	1.2992	1.5060	98.08	0.9397	1.0312	0.9060	0.7758	128.34	1307.84
Supp 3	1.2961	1.5023	97.71	0.9371	1.0290	0.9030	0.7731	127.86	1315.85

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Before You Trade the USD/JPY Breakout, Watch this Video

 

 

Over the past few weeks, USDJPY and a number of other dollar-based majors have developed clear congestion patterns. This past session, a sharp dollar drop triggered a number of technical breakouts. Having waited so long for meaningful volatility and trend development, it is tempting to jump on board of these clean moves. However, there are a number of problems with taking these enticing trades. A dubious spark, lack of fundamental drive in the upcoming session and the knowledge of market-altering event risk next week require a closer look. We look at the breakouts from USDJPY, EURUSD, GBPUSD and other pairs and discuss their trade potential in today's video.

 

Source: http://dld.bz/cJNdn



Sterling Top Performer Again as US Dollar Retakes Pre-Bernanke Losses

ASIA/EUROPE FOREX NEWS WRAP

The Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) continues to build on its rebound from its lowest level since June 26, as market participants’ fears regarding dovish jawboning from the head of the Federal Reserve have been soothed following round one of his testimony in front of Congress.

While the prepared remarks for the two days of questioning were released early and sunk the US Dollar due to their dovish tilt, the Q&A portion of the questioning resulted in US Dollar strength – a trend that has become more common at these gatherings. Today, with the remarks having been released and the US Dollar already a top performer, it is possible that further gains may be likely as the morning progresses.

Elsewhere, the British Pound is working on its second consecutive day of leadership following more strong data from the 2Q’13. Although hope for stronger growth was diminished after the official Industrial and Manufacturing reports for May were released, better than expected consumption figures in context of rising prices suggests that economic activity may indeed be improving.

Nevertheless, British Pound strength may be short lived. From the onset, the intention of Bank of England Governor Mark Carney has been to clarify policy and be more transparent; the introduction of forward guidance was intended to help in the pursuit of this goal. And the goal is to let market participants know that UK interest rates will be kept lower for the foreseeable future. Yet the reaction seen in the Sterling says that ‘no additional easing’ from Carney equates to ‘tightening.’ The BoE will take note and recalibrate quickly, which should weaken the British Pound in due time.

Read more: British Pound Jumps on Improved June Retail Sales Figures

Taking a look at European credit, strength in peripheral debt, as German yields have eroded more than US yields, has resulted in only a modestly weaker Euro. The Italian 2-year note yield has decreased to 1.668% (-4.9-bps) while the Spanish 2-year note yield has decreased to 1.920% (-7.9-bps). Similarly, the Italian 10-year note yield has decreased to 4.437% (-5.3-bps) while the Spanish 10-year note yield has decreased to 4.634% (-8.1-bps); lower yields imply higher prices.

RELATIVE PERFORMANCE (versus USD): 10:50 GMT

GBP: +0.06%

CAD: -0.09%

EUR: -0.17%

NZD:-0.24%

CHF:-0.31%

JPY:-0.47%

AUD:-0.64%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.19% (+0.16%prior 5-days)

ECONOMIC CALENDAR

 

TECHNICAL ANALYSIS OUTLOOK

 

EURUSD: No change: “with back-to-back Hammers on the daily chart amid price recovering the 50% retracement of the July low/high, it appears that a retest of the critical 1.3175/245 zone may be necessary before another dip. This zone has been approached but not yet broken, indicating that that “short-term price action is thus biased lower unless $1.3200/10 is breached.Overall, a [weekly] close below 1.2800 tentatively triggers the broader H&S pattern, whose measured move points to a return to the June 2010 lows near 1.1875. A break of 1.3175/245 puts 1.3300 and 1.3400/20 in focus.”

 

USDJPY: No change as prices have ranged the past five days: “The rejection of the 76.4% Fib retracement at ¥101.35/40 (May high to June low) is only a near-term setback, as the break off of the late-May to mid-June correction in the pair completed the last week of June. …longs preferred into early next week. Indeed, the 50% retracement of the June low to July high at 98.75 held as support and the pair has already bounced higher; a run at 102.00 shouldn’t be ruled out this week. A daily close below 98.75 negates this bias; a move to 97.00 would be anticipated on a reversal lower.”

GBPUSD: While the ‘big picture’ move towards $1.4225/40 is underway, the first Fibonacci extension objective at 1.4850/53 was reached and has produced a rebound. Resistance found at 1.5170/80 (21-EMA, 23.6% Fib January high to July low) broke earlier, biasing price higher into 1.5275/300 (July highs, 55-EMA). A rebound could see the pair back up towards 1.5390/400 (38.2% Fib), which has proven to serve as both support and resistance since April.

AUDUSD: No change: “Despite chopping around and through said level, the AUDUSD has more or less held the 38.2% Fibonacci retracement off the 2008 low to the 2011 high at $0.9141. While fundamentally I am long-term bearish, it is worth noting that the most readily available data shows COT positioning remains extremely short Aussie...A Bullish Broadening Wedge may be forming at the lows as a base; 0.9750/75 would be the target on a close above 0.9415.”

 

S&P 500: No change: “Now price finds itself on its way towards mid-June swing highs and the 76.4% Fib retracement (May high June low) at 1655/60. Gains have accelerated, with the S&P 500 achieving the 88.6% Fib retracement at 1672/75 overnight; a test of the yearly and all-time high at 1687.4 shouldn’t be discounted yet.1640 is key support for bulls.”

 

GOLD: No change “Gold has fallen into the 10/20 RSI support region, where price has held on numerous probes lower ultimately producing a short-term rally. More recently, daily RSI has only dipped into this region in mid-February and mid-April…Basing just below $1200/oz shouldn’t be dismissed, as at 1189.91 lies the 100% extension of March high/April low/April high move, as well as the 61.8% extension of the October high (post-QE3 announcement)/April low/April high move at 1192.” It should be noted that the rally off of Friday’s low has produced a maximum of +10.02% so far, eclipsing the rebound seen from late-May to early-June, when Gold rebounded by +6.36%.

 

Source: http://dld.bz/cJbXZ

USD Outlook Hinges on Bernanke Testimony- EUR Remains Capped

Index	Last	High	Low	Daily Change (%)	Daily Range (% of ATR)
DJ-FXCM Dollar Index	10818.64	10887.58	10812.6	-0.54	102.61%

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) is trading 0.54 percent lower from the open despite the slew of positive data coming out of the world’s largest economy, and the reserve currency may continue to consolidate ahead of the Humphrey-Hawkins testimony with Fed Chairman Ben Bernanke amid the growing discussion at the central bank to taper the asset-purchase program. Although a head-and-shoulders top appears to be taking shape, the dollar may regain its footing over the next 24-hours of trade as the 30-minute relative strength index comes up against oversold territory, and we may see the greenback breakout of the downward trend from earlier this week on a move back above the 78.6 percent Fibonacci expansion around 10,843. As the shift in the policy outlook limits the downside for the greenback, we will look to buy dips on a longer-term scale, and will continue to look for a higher low in the index as the central bank appears to be slowly moving away from its easing cycle.

As the Fed anticipates a stronger recovery in the second-half of the year, Kansas City Fed President Esther George, who serves on the FOMC, argued that the committee should start to scale back on quantitative easing ‘sooner’ rather than later, and went onto say that the central bank should not keep the benchmark interest too low for too long as the economy gets on a more sustainable path. Indeed, there’s growing speculation that the Fed will start to taper its asset-purchase program at the September 17-18 meeting, and we may see Chairman Bernanke lay out a more detailed exit strategy as the central bank turns increasingly upbeat towards the economy. As the USDOLLAR consolidates above the 38.2 percent retracement around 10,803, a less dovish tone from the central bank head may produce a higher low in the index, but we may still see a larger correction in the greenback as the FOMC continues to promote its highly accommodative policy stance.

The greenback weakened across the board, led by a 1.42 percent decline in the Australian dollar, which was followed by a 0.58 percent decline in the Euro. Indeed, the near-term rebound in the EURUSD may spark a test of the June high (1.3415) as the European Central Bank (ECB) continues to see the euro-area returning to growth later this year, but the Governing Council remains poised to further embark on its easing cycle in an effort to encourage lending to small and medium-sized enterprises. In turn, we may see the EURUSD remain capped by the 1.3200 handle, and the single currency remains poised to face additional headwinds over the near-term as the region remains mired in recession.

 

Source: http://dld.bz/cHSH3

Trading Forex Market Swings

Trend traders in the Forex market look to identify market direction prior to entering into a trade. However, price rarely moves in one singular direction, so this task can be more difficult than it seems. For savvy traders, these counter trend moves, can often allow entries into an established market at a better price. Today we will review trading these market swings and learn how to identify an entry when momentum swings back into the direction of the primary trend

.

Below we can see an example of the GBPNZD 8Hour chart trending lower over the last month. Even though price has declined as much as 1194 pips, notice how it has not been a one way directional move. Along the way there have been many opportunities to find new selling opportunities as the market provides a short term rally. So how can we better identify these chances to trade?

Learn Forex –GBPNZD Trend

To time our entry into a trade, a technical indicator such as an oscillator is often used. When a market is in a downtrend, traders can wait for an indicator to become overbought. Overbought describes a scenario where the market may be overvalued causing an indicator to reach its upper bounds. Below we can see the Commodity Chanel Index, (CCI) which is very similar to other oscillators, such as RSI, or Stochastics.

Pictured below, we can see that above the +100 value is considered overbought while below the -100 value is considered oversold.The key is to timing new our entries on the GBPNZD will when momentum returns to the downside. This means traders should wait for the indicator to close back under +100 while momentum resumes moving lower. With this in mind, now let’s return to our GBPNZD graph.

Learn Forex –CCI Overbought / Oversold

Below we again can see our GBPNZDY8Hour chart previously mentioned, but this time we have included the CCI indicator. You will notice that there have been a total of four opportunities to sell the pair as momentum returned lower. The key is to time your entry as CCI moves back below +100 indicating the conclusion of our short term rally with momentum returning to the markets longer standing trend. As with any strategy, managing risk is a high priority. One way to manage risk is to place a stoporder over the previous swing high. This way in the event that our downtrend is concluded we can exit any positions to sell at their first convenience.

Learn Forex –GBPNZD CCI Entries

 

 

Source: http://dld.bz/cHP9t

Chinese GDP Sets Table for Improved Risk amid CPI Data from EZ, UK, US

While the economic calendar this week is more saturated than that of the past week, the diversity among major data prints is nonexistent. Of the events ranked as “high” by the DailyFX Economic Calendar, nearly half of major data this week is inflation related, with Canada (Friday), the Euro-Zone (Tuesday), the United Kingdom (Tuesday), and the United States (Tuesday) releasing their June updates.

Certainly, the week started on a positive note thanks to the…relief…surrounding the 2Q’13 Chinese GDP print. Although the headline annualized print of +7.5% came short of the +7.7% consensus forecast (and +7.7% model estimate), there had been growing chatter the past week or two that a print near +7.0% should be expected; needless to say, the report can be viewed as somewhat positive in that regard.

In light of these events, it is possible that in the face of soft inflation figures and relief around China, that the commodity currencies retake some of their recent sharp losses against the European and North American currencies, with risks weighted for excess volatility given the fact that the important data this week is directly related to central bank policy. Speaking of which, Federal Reserve Chairman Bernanke takes to Capitol Hill on Wednesday and Thursday for his semiannual (and perhaps last) testimony in front of Congress – this very well may be the most important event all week.

Rate Hike Probabilities / Basis-Points Expectations

 

07/15 Monday // 12:30 GMT: USD Advance Retail Sales (JUN)

Consumption is the cornerstone of the world’s largest economy and the Advance Retail Sales report is the best proxy for consumption in the United States. Accordingly, with jobs growth starting to pick up, market watchers are intently watching to see if gains in the labor market translate into broader economic growth as the increase in disposable income circulates through the economy. As such, June sales were expected to have increased at a faster rate than in May, as well as over the three month average of +0.1% m/m. Accordingly, a beat here would imply a revision higher on the June NFP figure once the next labor report is released.

CONSENSUS: +0.7% m/m

PRIOR: +0.6% m/m

The key pairs to watch are EURUSD and USDJPY.

07/16 Tuesday // 08:30 GMT: GBP Consumer Price Index (JUN)

The Bank of England has kept its monetary policy unchanged for a year now, and its main interest rate has been pinned at 0.50% since March 2009 in an effort to jumpstart the economy. However, loose monetary policy has paved the way for higher price pressures ahead of strong growth, with the UK running the highest rate of inflation among the countries/currencies covered by DailyFX Research. Higher inflation has hurt the UK, as it not only has sapped consumers’ purchasing power (consumption accounts for 62% of headline GDP), but it has prevented the BoE from introducing further stimulus. With Governor Mark Carney now in the driver’s seat, it is likely that the only issue standing between him and more stimulus is higher price pressures; and the expected +3.0% y/y print would present an obstacle. The British Pound could benefit on such data.

CONSENSUS: +3.0% y/y

PRIOR: +2.7% y/y

The key pairs to watch are EURGBP and GBPUSD.

07/16 Tuesday // 09:00 GMT: EUR Euro-Zone Consumer Price Index (JUN)

Inflation tends to be an indicator of growth (albeit a lagging one) which is part of the reason calls for a continued recession in the Euro-Zone linger. Indeed, the +1.6% y/y forecast, in line with the prior month, is hardly a sign of strong growth, and fits in with the European Central Bank’s baseline scenario of “broadly balanced” and “anchored” inflation expectations over the medium-term policy horizon. With the ECB having just introduced forward guidance less than two weeks ago, the Euro retains proximal sensitivity on issues that might affect policy decisions; further weak inflation data stands to serve as a bearish catalyst.

CONSENSUS: +1.6% y/y

PRIOR: +1.6% y/y

The key pairs to watch are EURGBP and EURUSD.

07/16 Tuesday // 12:30 GMT: USD Consumer Price Index (JUN)

The stronger US Dollar in the 2Q’13 helped insulate the US economy from higher rates of inflation, which is a major reason why consumers have stayed resilient despite the government’s austerity measures. But with aggregate demand increasing amid a steadily improving labor market, an uptick in inflation would be a welcomed confirmation that growth is starting to hit its stride. Accordingly, the recent bout of disinflation is likely to have ended according to forecasts compiled by Bloomberg News, with a slight two-tenths of percent uptick expected. Given the Fed’s insistence that recent softer inflation figures are transitory, a miss here could set back the US Dollar.

CONSENSUS: +1.6% y/y

PRIOR: +1.4% y/y

The key pairs to watch are EURGBP and EURUSD.

07/17Wednesday // 14:00 GMT: USD Fed Chairman Bernanke Testifies at Congress

Fed Chairman Bernanke will take to Capitol Hill on Wednesday and Thursday for his semiannual Congressional testimony on the state of the US economy and monetary policy. In what could very-well be his last testimony as Fed overseer (his term expires in January), Chairman Bernanke will retain his recent bias as exhibited from the June 19 policy meeting to last Wednesday’s comments at a conference in Boston: the US economy is doing good, not great; the labor market has improved but isn’t where it should be; and US monetary policy needs to remain accommodative in the face of restrictive fiscal policy. Considering that the US Dollar took a dive when Chairman Bernanke made these comments to highlight the Fed’s intention to merely slow its pace of easing, not cut it off completely (taper versus tightening), it is very likely that the US Dollar trade nervously ahead of the Congressional fireworks midweek.

The key pairs to watch are EURUSD and USDJPY.

 

 

Source: http://dld.bz/cHKVF