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Forex Flash: QE3 prospects have lent the euro some support - BBH

By FXstreet.com,  July 17, 2012, 07:26:00 AM EDT

FXstreet.com (Córdoba) - The US dollar is broadly weaker against major and EM currencies amid hopes that Bernanke will hint at further monetary easing at today's Senate testimony. According to the BBH team, "recent price action continues to follow a familiar script, where the dollar softens into the event only to firm afterward given no hints of QE3".

"Bernanke's 2-day semi-annual Humphrey-Hawkins testimony starting today has taken on greater significance after the poor US retail sales data for June. Of course, his testimony before Congress will be scrutinized for hints about new asset purchases", they say.

"We think that by the end of this week, markets will have gotten over this current round of QE3 hopes. However, we know that this story will ebb and flow as the year progresses. Next FOMC meeting is August 1, and Bernanke testimony this week should quash any thoughts of easing then", BBH comments. "The Jackson Hole Fed conference takes place at the end of August, so markets will no doubt be looking for QE3 clues then ahead of the September 13 FOMC meeting".

"For now, QE3 prospects have lent the euro some support. Initial retracement objectives from the June 29-July 13 drop come in near 1.2365 and 1.2430, and break of the 1.2500 area needed to improve the technical picture for the euro", they add. "Fundamentals favor a weaker euro once the QE3 outlook clears up".




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.


This article appears in: Investing, Forex and Currencies

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