The US dollar staged a solid recovery on Friday, as the dollar index bounced from key trendline support that formerly served as resistance from late 2005 – 2007.
Meanwhile, Federal Reserve Chairman Ben Bernanke spoke on financial stability at the Kansas City Fed's annual Jackson Hole conference. His commentary didn’t necessarily reveal anything new, though he did say that “the recent decline in commodity prices, as well as the increased stability of the dollar, has been encouraging. If not reversed, these developments, together with a pace of growth that is likely to fall short of potential for a time, should lead inflation to moderate later this year and next year.” However, the rest of Mr. Bernanke’s speech was status quo, as he said “the inflation outlook remains highly uncertain” and that the “FOMC is committed to achieving medium-term price stability and will act as necessary.” Nevertheless, despite the fact that the financial health of the two US mortgage giants Fannie Mae and Freddie Mac remain a major concern in the markets, Mr. Bernanke said nothing about them. It appears that when it comes to that sensitive issue, Mr. Bernanke will allow US Treasury Secretary Henry Paulson to do all the talking.
Looking ahead to next week, the US dollar faces heavy event risk as S&P/Case-Shiller home prices, consumer confidence, durable goods orders, and Q2 GDP revisions will all hit the wires. However, the minutes from the Federal Reserve’s August meeting may be the event to watch, especially if the commentary signals any sort of bias within the FOMC.
**Want to know what happened in the rest of the majors or view technical support/resistance levels? Check out the Daily Fundamentals in its entirety.
