Bernanke Testimony Supports Dollar

The U.S. Dollar has picked up strength since the New York trading session began driven by the testimony of Fed Chairman Bernanke.

The U.S. Dollar has picked up strength since the New York trading session began driven by the testimony of Fed Chairman Bernanke.

Bernanke’s comments regarding the Fed’s control over inflation in my opinion is the force driving the Dollar higher. For months, traders believed that inflation would weaken the Dollar but it appears that Bernanke believes he has the tools to combat inflation.

The news that the Fed is considering an exit strategy is weakening the EUR USD. This is a sign the U.S. economy may be poised to begin its recovery while the Euro Zone still wallows in recession.

The GBP USD is also under pressure. Traders are concerned that the recession in the U.K. is far from beginning a recovery and that the Bank of England may not have enough money to provide additional stimulus because of the huge budget deficit. Investors are also beginning to lighten up long positions in anticipation of a weak preliminary GDP number on Friday.

Higher-yielding currencies such as the Australian Dollar and New Zealand Dollar are also trading lower at the midsession. Traders fear that a hike in interest rates by the Fed sometime in the future will mean an end to the free money flowing into these two economies.

Weakness in the U.S. stock market is sending traders to the Japanese Yen. Repatriation by Japanese investors and the general lack of demand of higher risk assets is putting pressure on the USD JPY.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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