U.S. Dollar Weakens on Bernanke Testimony

The U.S. Dollar is extending its earlier losses at themid-session, driven by the dovish testimony of Fed Chairman Bernanke. Inaddition to commenting on the direction of interest rates, Bernanke alsoemphasized that the economic recovery was still sluggish because of thefloundering labor market.

The U.S. Dollar is extending its earlier losses at themid-session, driven by the dovish testimony of Fed Chairman Bernanke. Inaddition to commenting on the direction of interest rates, Bernanke alsoemphasized that the economic recovery was still sluggish because of thefloundering labor market. 

Testifying before the Joint Economic Committee, Bernankereiterated the Fed’s stance that interest rates would remain low for an “extendedperiod”.  He also said “the income datasuggest that growth in private final demand will be sufficient to promote amoderate economic recovery in coming quarter”. Finally, he added that “significantrestraints on the pace of the recovery remain including weakness in bothresidential and nonresidential construction and the poor fiscal condition ofmany state and local governments.”

All of this adds up to the perception of a weaker Dollar. Investorswho were banking on a more hawkish comment have been paring their positionstoday.

 Prior to the Bernanke testimony, the U.S. Dollarstrengthened a little following a better than expected Retail Sales Report. Thisreport was another sign that the consumer was helping the economy to recover,but the strength it generated was short-lived due to the Bernanke comments.

 Bernanke’s testimony put the dismal Greek financial situationon the back-burner for at least a day. The EUR USD is rising at the mid-sessiondue to expectations of lower U.S.interest rates for a prolonged period.  Gainsin the British Pound are also being attributed to lower U.S. interestrates.

 Despite the stronger equity markets and a pick-up in demandfor higher yielding assets, the USD JPY is under pressure after failing topenetrate a key 50% retracement level at 93.67. The Dollar/Yen has been underpressure since last week’s closing price reversal top at 94.77. The daily chartindicates this market is set up for a retracement to 92.26.

 Increased demand for higher yielding assets is helping to boostthe Canadian Dollar, Australian Dollar and New Zealand Dollar. The CanadianDollar made a new high for the year early in the session because of strongerequities and commodities, and extended its gains once Bernanke said interestrates would remain low. The Australian Dollar is rebounding after a two-daysetback on increased demand for higher yielding assets. The New Zealand Dollaris rallying for the same reason as well as a technical factor. Regaining andholding above a key 50% level at .7124 is helping to push this market higher.

 

 

 

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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