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Another Day, Another Bernanke – EUR/USD Falls to Support

In his second appearance before lawmakers in Washington, Ben Bernanke had a different tone, than yesterday’s dovish one. He put an emphasis on higher inflation and that it would eventually be encountered. At the moment, no action is likely. The dollar recovers.

Bernanke just mentioned yesterday that “all the options are all the table”. This was enough to spark talks about QE3 just around the corner. The Chairman probably acknowledged the impact of his open door, and made some clarifications now.

Dr. Bernanke made a comeback to his tone at the press conference from June: the situation is now different, with no deflation fears and higher inflation. The goal of QE2 was to depress deflation, and it worked, according to the Federal Reserve.  

It’s not that the economy is doing much better, but the dollar printing scheme achieved its goal. A third quantitative easing program is not totally ruled out, but will not happen soon.

Dollar stronger

This enabled some profit taking for shorters in USD/JPF and USD/CHF – the safe haven currencies. But more importantly, it took out a lot of hot air from the euro’s recovery.

EUR/USD is now at the low end of the wide 1.4160 – 1.4282 range. It entered this high range on Bernanke’s dovish words yesterday, and later enjoyed the warning by Moody’s.

But the situation isn’t too good in Europe either. Tomorrow’s stress tests just cannot do any good to the common currency. No comprehensive and long term solution for the debt crisis is visible, despite interesting ideas floating around.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.