A wild day in financial markets with Ben Bernanke sowing a great deal of confusion with his appearance before the Joint Economic Committee. His opening statement was extremely dovish and the dollar duly tanked. EUR/USD rose to 1.2998 and USD/JPY slide to 102.69. Not long later, the market reversed course when Bernanke answered a question on whether the Fed could begin to taper by Labor Day buy answering in the affirmative, with multiple caveats.
The market only paid attention to the affirmative answer and set about buying back dollars against the euro, sterling and commodity currencies and selling dollars versus the JPY and to a lesser-degree the CHF.
It was a return to classic “risk off” and EUR/JPY took a caning. That cross fell from a new multi-year high at 133.77 to a low of 131.99 in late New York trade. It is trying to stabilize around the 10-day average at 132.00 late in the day.
USD/JPY looks like it too may have but in a blow-off top, rising to 103.73 only to end at 102.85.
Equities will be the main focus overnight, so keep an eye on S&P futures. Tomorrow, jobless claims will get massive scrutiny. Strong data will have the market jumping to price in a near-term taper. Weak data will push the taper farther into the future.
Jamie Coleman@fxbrief
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