USD rules as Bernanke crash lands the helicopter

The Fed Chairman has sent stocks and bonds crashing after Bernanke said the US Central Bank will start taking their foot off the QE pedal. Investors ran for cover after the Chairman said the Fed could start winding down its $85 billion a month bond buying programme towards the end of the year and have the entire programme completed by the summer of 2014. It  added the usual comment that this is of course dependant on the US economy continuing to perform robustly.

The key takeaways from the statement are exactly what the market had been looking for: the Fed’s policy is no way pre determined and is dependant on incoming data and the economic outlook, and the Fed will continue to buy assets at $85 billion per month as long as the unemployment rate is above 6.5%. Purchase could taper whilst the rate was around the 7% level as long as solid economic fundamentals supported further growth in the labour market.

In other news the HSBC China manufacturing PMI dropped to a nine-month low of 48.3 from 49.2 in May, adding further pressure to commodities and the AUD, with the latter sitting vulnerably on the 0.9225 support.

Today will be all about the dollar as I expect the market to start re-instating the dollar longs that were reduced going into the Fed meeting. The data today consists of European PMI data and UK retail sales with the US session bringing us further housing data, weekly jobless claims and the Philadelphia manufacturing survey. Keep an eye on the SNB meeting at 8.30am this morning as although no policy change is expected, there is speculation of a very dovish statement keeping the negative rates debate open.

EUR/USD

Supports 1.3230-1.3175-1.3100 | Resistance 1.3300-1.3350-1.3410

USD/JPY

Supports 96.15-95.75-94.80 | Resistance 98.00-98.70-99.25

GBP/USD

Supports 1.5420-1.5375-1.5250  | Resistance 1.5500-1.5565-1.5615