Bernanke To Boost EUR/USD?

We’re up for a very volatile start to the week, with Bernanke’s QE3 and high hopes in Europe, despite fresh signs of the fragile situation there. Another good start for EUR/USD is likely. Update.

The news about Ben Bernanke’s QE3 ideas were released very late on Friday, and weren’t digested by the markets yet. The full interview on 60 minutes will be aired on Monday at midnight GMT, and we’ll know exactly what he said.

Speaking on 60 minutes in March 2009, Bernanke hinted about the massive quantitative easing program, more than $1 trillion, that was announced a few days later, following the FOMC meetings. EUR/USD then jumped by 600 pips.

We’re aren’t going to have a re-run of that scenario, but if the chairman does clearly state that more dollars will be printed, if he is firm about “taking all the necessary steps”, we could see the dollar continue falling.

EUR/USD Still enjoying Trichet

The Euro made a big recovery following the bond buying from Jean-Claude Trichet, that began on Thursday. The hopes are still high, despite some worrying news from Europe over the weekend:

• Spain Under Pressure – The Spanish government finds it hard to make reforms, and is under external and internal pressure.
• Irish Pound Comeback? – The chief  executive  of PIMCO said that  Ireland  will eventually be out of the Euro-zone.
• Belgian Bailout? – The Belgian finance minister said that the bailout fund should be increased. Is he preparing his country for a bailout?

Trichet’s actions are currently stronger than all these worries.

What exactly did Trichet do? We’ll get answers regarding the size of the bond buying on Monday at 14:00. We’ll also see if these actions were sterilized – meaning that the money will be withdrawn from the market, or unsterilized, meaning that Trichet joins the QE-club and hit the printing presses.

If the answers are disappointing, all the bad headlines from Europe will return to center-stage and the Euro will resume its falls. The past two weeks started well for the Euro, and then turned around.

A very volatile Monday is expected, and that’s before indicators kick in later in the week.

For an outlook of events and fresh technical analysis for the Euro, see the EUR/USD forecast.