US session review: Bernanke caused US dollar to jump higher

The U.S. dollar jumped against the main rivals s Federal Reserve Chairman Ben S. Bernanke said the central bank could reduce its bond-buying this year and end it next year if economic improvement continues.

The U.S. currency gained versus a majority of its 16 most-traded peers as Fed policy makers will keep buying bonds at a pace of $85 billion a month and said that risks to the economy have decreased. They also lowered forecasts for the unemployment and inflation rates this year.

Bernanke said on May 22 that policy makers could reduce their monthly purchases of $45 billion of Treasuries and $40 billion of mortgage securities if the employment outlook shows sustained improvement.

According to Bernanke FOMC is beginning to talk about updating its exit strategy, 6.5% level in the unemployment rate is a threshold, not a trigger, for the first rate hike, Fed could begin to taper its bond purchases later this year, if its forecasts for inflation and unemployment are correct.

EURO:

Eurozone officials said today they  won’t revise Cyprus bail out conditions after requests from the  Cypriot President Anastasiades yesterday for a complete revamp of the Eur 10 bln bailout, where the country economy and banking system have been severely damaged, by the conditions imposed on the island.

EUR/USD has lost around 100 pips from highs above $1.3400. Initial support remains around $1.3280 (Jun 13 lows), $1.3200 and $1.3170 (Jun 10 lows). Above $1.3400 (initial resistance, Jan 14 highs) resistance comes at $1.3450/80, then - near $1.3540 (channel resistance line from May 29).

POUND:

The MPC minutes have shown once again the same voting pattern to keep interest rate intact at 0.5%, 9-0, and 6-3 in favour of leaving the asset purchase programme unchanged at £375 billion, with King, Fisher and Miles advocating for an increase to £400 billion.

GBP/USD lost more than 200 pips. having tested resistance at $1.5660 and bounched back. Next support is at $1.5521 (low Jun.11). On the upside, a break above $1.5696 (MA200d) would open the door to $1.5723 (high Jun.18) and then $1.5753 (high Jun.17).

YEN:

Bank of Japan Governor Haruhiko Kuroda said on Wednesday during a semi-annual parliamentary hearing in Tokyo that the central bank would maintain its current monetary policy until a sharp change occurs in the economy. Even though the situation of the economy remains uncertain, the BoJ governor sees it starting to recover gradually in the nearest future while financial markets return to stabilization.

USD/JPY is on the rise. Resistance is around Y96.20 (Jun 12 hourly highs) and Y97.00 (Jun 12 highs).  Minor support placed at Jun 17 lows on Y94.30, extending to Y93.80 (Jun 13 lows). Below support comes at Y93.50 (Mar 25 lows) and then - at Y92.50 (Apr 2 lows).

DATA AHEAD:

NZ  Gross Domestic Product is expected at 22:45 GMT.

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