Watch Out For Bernanke’s Magic Scissors

US consumer confidence came in at a weaker-than-expected 95.6 (99.5 expected) for October vs a prior 99.5 (revised from 99.8). This is the third consecutive month of a decline in consumer confidence. This is not the only USD-negative news. US home prices dropped the most since 1991, according to S&P/Case-Shiller index. An index of 10 US metropolitan areas fell 5% in August from a year ago, and Shiller himself said “the fall in home prices is showing no real signs of a slowdown or turnaround”. The US dollar has no ally when it comes to either the fundamentals or the prevailing market sentiment.

USD/CHF has broken below 1.1600, and next nearest support around 1.1570-80, 1.1550. EUR/USD may next aim for 1.4490-1.4500, 1.4530-50 if it breaks above 1.4450.

USD/CAD continues its path downslope again today, approaching 0.9500 (intraday low of 0.9520 so far), a short-term bear target previously mentioned.

Volatility hounds will not be disappointed tomorrow as there will be a great amount of economic data to be released. The most notable event will be the FOMC rate announcement.

Current USD weakness and bullish run in stocks can be attributed to market players’ expectations of a rate cut by Bernanke et al. Even if they do slash the rate, traders and investors will still be more inclined to sell the greenback.

In fact, US Vice President Dick Cheney had told CNBC’s Larry Kudlow on Friday that the market was doing exactly what it should do in terms of setting the value of the dollar. Does he want the USD to go down even more? Anyway, we must all be prepared for the unexpected, that the Fed may not cut rates after all.

Wednesday:

New Zealand NBNZ business confidence 0200 GMT

Eurozone consumer confidence 0900 GMT

Eurozone CPI estimate, unemployment rate 1000 GMT

UK Gfk consumer confidence 1030 GMT

US ADP employment change 1215 GMT

Canada GDP 1230 GMT

US GDP, core PCE 1230 GMT

US Chicago PMI 1345 GMT

US FOMC rate decision 1815 GMT (rate expected to cut from 4.75% to 4.5%)

Posted in Categories: Forex.

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