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The prepared statement by Ben Bernanke contains no new details despite expressing concern from European issues and fiscal cliff. Euro bulls have some hope with the upcoming Q&A session. Update: Bernanke said in the Q&A session that “there may be diminishing returns” concerning QE3.

EUR/USD bounces off resistance and falls quickly, dipping below another support line. This is a “buy the rumor, sell the fact” behavior, expect that there was no fact – no QE3 hints. Update: EUR/USD stabilizing above 1.2550.

Bernanke did say that the Federal Reserve is ready to act. This is not new. He did say in the past that the “Fed is already doing a lot”.

Bernanke also surprised by downplaying the weak jobs report: blaming it on seasonal adjustments after a warm winter. In the past, Bernanke downplayed the good figures at the beginning of the year. He is certainly careful. From the statement:

This apparent slowing in the labor market may have been exaggerated by issues related to seasonal adjustment and the unusually warm weather this past winter

Bernanke is under political pressure to avoid QE3 by some members of the committee. He was asked directly about QE3 but will likely avoid a direct answer.

With weaker signs in the US economy and rising tensions in financial markets, Bernanke was expected to provide hints for more monetary stimulus such as QE3 in the next meeting of the FOMC, scheduled for June 20th – after the Greek elections and as G-20 leaders conclude their meetings.

In the anticipation to Ben Bernanke’s appearance, the US dollar weakened, and EUR/USD flirted with critical resistance.

EUR/USD fell as low as 1.2578 before bouncing back in a choppy reaction. It is currently at 1.2590. 1.2587 is minor support, with 1.2540 being more important.

Updates from Q&A session:

  • European tensions rose, but there’s not much the US can do.
  • Housing is stabilizing
  • Haven’t decided on QE3
  • Returns on QE are diminishing