The greenback declined against most of its peers

The greenback declined against most of its peers.

Last night, after a very quiet European trading session, the dollar started to weaken strongly. The dollar index tumbled after Bernanke said the US economy still needs stimulus because the inflation and the unemployment rate are below target.

These words can affect the dollar in the longer term, so today we are going to have a very choppy day. What we see now is that the 20 days dollar strengthening period is over by now.
Technically the EURUSD could make a correction today and get back to test the 1.3000 level, but afterwards it could recover again, I bet on the bullish trend until end of this month.


The fallout from Bernanke’s dovish comments continue. Major levels are being breached with some pairs moving hundreds of pips.

EUR/USD is challenging 1.32, GBP/USD is close to 1.52 and USD/JPY is around 98.50 — updates coming

• EUR/USD is already over 300 pips higher since Bernanke opened his mouth: from around 1.2880 to 1.3192 at the time of writing. Resistance is at 1.32 followed by 1.3250. Support at 1.3160, followed by 1.31.
• GBP/USD is over 250 pips since the comments were made. It traded in the mid 1.49s, and it is now just under 1.52. This line, 1.52, serves as resistance. Support is at 1.5144.
• AUD/USD was temporarily blocked by a double top, but it broke above it and is trading at 0.9264. The next significant level is 0.9344. Support is at 0.9233.
• USD/JPY is trading at 98.60, after falling even lower beforehand. The pair was trading over 100.40 earlier in the day. Moves here are quite violent. The really big support line is at 95.
• USD/CAD dropped as low as 1.0375. It traded above 1.05 beforehand. Support is at 1.0360, followed by 1.03.
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  EUR: The ECB monthly report is usually not that interesting, but could be more of an event risk today should the ECB offer more detail on its decision to offer ‘forward guidance’ at this month’s meeting.
  Idea of the Day
  There was a notable turn around in the dollar overnight, thanks to comments from Fed Chairman Bernanke as well as the minutes to the June FOMC meeting.
  The minutes were highlighting the conditionality of the Fed stepping back from bond purchases and the need for more signs of improvement of the labour market.
  Meanwhile, the Fed Chairman stated that “Highly accommodative monetary policy for the foreseeable future is what’s needed in the US economy”. The reaction seen on the dollar reflects the extent of dollar long positions in the market, with stops triggered across the board in response to the two-pronged attack.
  On the majors, it was the euro and Swissie that gained the most vs. the dollar.  For today, it’s a question of whether the market is capable of picking itself off the floor and building a long dollar base once again.
  
  Latest FX News
  
  AUD: Mixed messages from the jobs data, with headline employment rising by a greater than expected 10.3k, whilst the unemployment rate increased from 5.6% to 5.7%. Full-time employment fell, whilst part-time increased.  Aussie propelled to a two week high vs. the dollar, largely owing to dollar weakness from Bernanke and FOMC minutes.
  
  JPY:  No new policy measures after the latest Bank of Japan meeting. As was anticipated yesterday, the ‘recovery’ word was mentioned for the first time since early 2011, although growth forecasts were cut a little.
  
  GBP: Cable propelled back above the 1.50 level by the broad dollar weakness seen overnight.