Yen Rallied after Bernanke, Bush Speeches by Yan Xu

The yen rallied broadly after Fed Chairman Ben Bernanke and US President George W. bush gave separate speeches with regard to recent credit crunch.

On the central bank’s annual symposium in Wyoming, Bernanke said market turmoil can hit many outside the markets and the Fed policy must take into account. He reiterated that the central bank will act as needed to protect the economy, leaving the door open for an interest rate cut in September. The market is divided on whether the Fed may cut interest rates from 5.25% on its monetary policy meeting on September 18. The dollar gained versus the euro and yen after Bernanke said it’s not the Fed’s job to protect investors from their own financial decision.

Later, Bush gave a speech on how to help homeowners struggling to pay their mortgages. He said there have admittedly been excesses in mortgage supplies. He said new foreclosure avoidance initiative will help avoid repeat of current situation. Also,he is asking Congress for a temporary change in tax code to prevent people from being penalized when they refinance subprime mortgages. However, like Bernanke, he said government’s job is not to bail out speculators. He said the economy is strong enough to withstand any turbulence and recent subprime issues are modest in relationship to the size of the economy.

Since all eyes were on Bernanke and Bush’s speeches today, the market was little moved after a bunch of US data. US PCE deflator for July maintained a growth rate of 0.1% in July, below the estimate of 0.2%. US personal income rose 0.5% and personal spending was up 0.4%. Chicago PMI changed from 53.4 to 53.8 in August. University of Michigan consumer confidence index fell from 90.4 to 83.4 in July, above the forecast of 82.7.

Besides, the Canadian dollar strengthened after a government report showed the second quarter GDP expanded at an annual rate of 3.4%, beating the consensus forecast of 2.8%.

EURUSD will face interim resistance at 1.3650, followed by 1.3680 and 1.37. Additional ceilings will emerge at 1.3730, backed by 1.3750. Support starts at 1.36, backed by 1.3570, 1.3550 and 1.3520. Subsequent floors are eyed at 1.35.

GBPUSD encounters interim resistance at 2.0180, backed by 2.02 and 2.0230. Subsequent ceilings will emerge at 2.0250, followed by 2.0280 and 2.03. On the downside, support begins at 2.0150, followed by 2.0120 and 2.01. Additional floors are eyed at 2.0080, backed by 2.0050 and 2.0020.

USDJPY encounters interim resistance at 116, backed by 116.20 and 116.50. Subsequent ceilings will emerge at 116.50, followed by 116.80 and 117. On the downside, support begins at 115.50 and 115.20, followed by 115. Additional floors are eyed at 114.80, backed by 114.50 and 114.20.