FOREX: Dollar Tumbles after Bernanke Curbs Speculation of a Timely Stimulus Withdrawal, 1Q GDP Due

I had high hopes for the Fed's rate decision and Chairman Bernanke's press conference this past session; and we weren't disappointed. Given the dollar's already crippling lows heading into the event, it would have taken a significant event to either jump start a recovery or forge meaningful follow through (it isn't that easy to encourage new shorts into a heavily saturated market).

• Dollar Tumbles after Bernanke Curbs Speculation of a Timely Stimulus Withdrawal, 1Q GDP Due
• British Pound Rallies after an In Line 1Q GDP Reading, Will this Climb Last?
• New Zealand Dollar Toppled by RBNZ Governors Warning that Rates Will be Held for a ‘Some Time'
• Euro Climbs on Dollar's Pain Though Data and Bank of Portugal Credit Outlook Deteriorate
• Japanese Yen Dodges a Bullet as the BoJ Holds its Policy Wholly Unchanged
• Gold Rallies to a Fresh Record High, But What is the Metal Worth in Euros?

Dollar Tumbles after Bernanke Curbs Speculation of a Timely Stimulus Withdrawal, 1Q GDP Due

I had high hopes for the Fed's rate decision and Chairman Bernanke's press conference this past session; and we weren't disappointed. Given the dollar's already crippling lows heading into the event, it would have taken a significant event to either jump start a recovery or forge meaningful follow through (it isn't that easy to encourage new shorts into a heavily saturated market). The event certainly delivered for fundamental influence and dollar impact. Immediately after the FOMC announced its decision to hold rates and delivered its preconceived statement, the greenback began a tumble that accelerated during the Bernanke's commentary and then again into the early hours of Thursday's trading session. This progressive decline has pushed the Dollar Index to its lowest level since July 31st, 2008 and cleared nearly all semblance of support the currency may have claimed amongst its major crosses. Forex traders shouldn't look for key levels for the currency at this point; rather they should be concerned with momentum and the major fundamental ties that can still guide price action.

Looking back at the event that collapsed the temporary floor underneath dollar, we can see the evolution of the bearish wave. After clearing the otherwise encouraging March durable goods orders report (which offered the greenback a slight boost), we came to the Fed's rate decision. The market learned many months ago to ignore the decision on the Fed Funds rate as the central bank hasn't budged from the target range between zero and 0.25 percent since December 2008. On the other hand, the FOMC statement held sway over speculative positioning. Considering we were heading into the first, post-decision press conference the policy authority has ever given; the prepared account could have heralded a hawkish turn by dropping the language that the rates would be held “exceptionally low” for an “extended period.” Yet, that same phrase was exactly where the group left it in March.

Moving on to the press conference, market participants were looking for economic forecasts, guidance on stimulus efforts and concerns about how the United States' monetary policy influences prices and markets globally. For forecasts, the Bernake lowered the 2011 growth outlook to 3.1 to 3.3 percent and set the jobless forecast to an 8.4 to 8.7 percent range. The all-important inflation projection was set to a 2.1 to 2.8 percent range (essentially establishing their tolerance for headline pressures up to 2.8 percent before they consider altering their stance prematurely) while the core scope was set to 1.3 to 1.6 percent. For those looking for a straightforward sign of timing, the Chairman said he didn't expect action for a “couple of meetings”, which would fit with the end of the QE2 buying and June and allowing for a period of assessment. The line in the sand may have been drawn though in his suggestion that the end of bond and MBS reinvestment would itself be a form of tightening. Perhaps that is our signal for the countdown to our first rate hike.

Looking ahead to the upcoming session, we have the US 1Q GDP reading. There are two angles for influence from this data: either it alters rate expectations or it sets off risk trends. Considering the Fed has pushed back debate on yields for a while, we'll look at its sentiment implications. S&P 500 futures are rising into the new trading day; and a data reaction is always easier to leverage when there is already momentum.

Related:Discuss the Dollar in the DailyFX Forum, John's Video: Long GBPUSD after the UK GDP Lifts the Pound, Fed Hammers the Dollar

British Pound Rallies after an In Line 1Q GDP Reading, Will this Climb Last?

For a reading that was essentially in-line with the popular consensus, the advanced reading of UK 1Q GDP certainly had a remarkable impact on the British pound. The sterling rallied sharply across the board after the Office for National Statistics reported a 0.5 percent increase in economic output through the first three months of the year, offsetting the 0.5 percent contraction form the previous reading. Generally, this is not a very robust pace of growth for Europe's second largest economy; and it certainly doesn't do much to diminish the risks with the government's efforts to rein in its debts during a temporary economic slump. That said, services grew the most in four years (0.9 percent) and manufacturing rose 1.1 percent. Growth in the right places allows some room for optimism – and it also keeps the door open for rate speculation surrounding the BoE.

New Zealand Dollar Toppled by RBNZ Governors Warning that Rates Will be Held for a ‘Some Time'

We weren't expecting much from the RBNZ rate decision as the market was pricing in little scope for movement. Indeed, the policy authority held the benchmark lending rate at 2.50 percent; but the commentary certainly caught many off guard. Central bank Governor Alan Bollard voiced his concern for economic conditions in the wake of the Christchurch earthquake rebuilding and suggested inflation would fall comfortably into their mandated band. What really discouraged though was his suggestion that this would “likely…remain appropriate for some time.”

Euro Climbs on Dollar's Pain Though Data and Bank of Portugal Credit Outlook Deteriorate

It isn't a feat to advance against the US dollar; but the euro's performance through this past 24 hours certainly spelled out strength beyond its reflective performance against the greenback. Climbing against most of its counterparts, the shared currency saw a second slip in German consumer confidence and the Bank of Portugal's report on credit conditions warn that the 2Q is in for a pinch. It's hard to explain euro strength.

Japanese Yen Dodges a Bullet as the BoJ Holds its Policy Wholly Unchanged

With so much monetary policy going on over the past 24 hours, it was easy to overlook the fact that the Bank of Japan was up to bat as well. Still struggling in the wake of the economic/financial/humanitarian crisis of last month; there was a good chance that the policy authority increased its stimulus efforts. Instead, the group left rates unchanged and kept its programs unchanged – though Nishimura called for another expansion.

Gold Rallies to a Fresh Record High, But What is the Metal Worth in Euros?

Gold was exceptionally strong through Wednesday's close and into Thursday's trading session – or was it? As we normally view it, gold hit a record high $1,532; but this has a lot to do with the dollar's own weakness. When we price the metal in euros, it would still advance; but gains were well off monthly highs (much less record highs). Capital is still comfortable moving from currency to currency rather than finding escape.

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ECONOMIC DATA

Next 24 Hours

GMT	Currency	Release	Survey	Previous	Comments
3:00	NZD	Money Supply M3 (YoY) (MAR)		5.2%	FDI will most likely grow M3 faster
4:00	JPY	Vehicle Production (YoY) (MAR)		-5.5%	Production for labor-intensive goods such as automobiles and houses will undoubtedly fall after demand hit by earthquake
5:00	JPY	Housing Starts (YoY) (MAR)		10.1%
5:00	JPY	Annualized Housing Starts (MAR)		0.872M
5:00	JPY	Construction Orders (YoY) (MAR)		19.5%
6:00	EUR	German Import Price Index (MoM) (MAR)	0.2%	0.9%	Slower growth in import prices may show slowdown in economic activity in Europe's main economy
6:00	EUR	German Import Price Index (YoY) (MAR)	11.3%	11.9%
6:45	EUR	French Consumer Spending (MoM) (MAR)	0.2%	0.9%	Domestic spending expected grow slower as risk increases
6:45	EUR	French Consumer Spending (YoY) (MAR)	3.7%	5.5%
7:55	EUR	German Unemployment Change (APR)	-37K	-55K	Unemployment in April expected to decline, helped by better manufacturing
7:55	EUR	German Unemployment Rate s.a. (APR)	7.0%	7.1%
8:00	EUR	Italian Business Confidence (APR)	103.5	103.8	Confidence remains flat as no real growth drivers evident
12:30	USD	Chicago Fed Nat Activity Index (MAR)		-0.04	Near post-recession highs, though has tapered off in previous months
12:30	USD	Gross Domestic Product (Annualized) (1Q A)	2.0%	3.1%	Slower annualized growth rate will confirm cautious state of economy, may prompt Fed to hold interest
12:30	USD	Gross Domestic Product Price Index(1Q A)	2.3%	0.4%
12:30	USD	Core Consumption Expenditure (QoQ)(1Q A)	1.4%	0.4%	Slower personal consumption may suggest most GDP growth from investment and government spending
12:30	USD	Personal Consumption (1Q A)	2.0%	4.0%
12:30	USD	Initial Jobless Claims (APR 23)	395K	403K	Small drop in unemployment figures may mean slower recovering economy
12:30	USD	Continuing Claims (APR 16)	3680K	3695K
13:45	USD	Bloomberg Consumer Comfort (APR 24)	-43	-42.6	Steadily dropping off after post-recession high in 3rd week Feb
14:00	USD	Pending Home Sales (YoY) (MAR)		-9.3%	Slower growth rate in real estate as well seem to confirm slowing recovery in the United States
14:00	USD	Pending Home Sales (MoM) (MAR)	1.5%	2.1%
22:45	NZD	Trade Balance (New Zealand dollars) (MAR)	200M	194M	Trade balance expected to be positive, even though near-record Kiwi should be hurting export competitiveness
22:45	NZD	Balance (YTD) (New Zealand dollars) (MAR)	375	758
22:45	NZD	Exports (New Zealand dollars) (MAR)	4.20B	3.87B
22:45	NZD	Imports (New Zealand dollars) (MAR)	3.90B	3.68B
	CNY	Leading Index (MAR)		101.05	Effects for PBoC tightening to be seen for tor March report
	JPY	BOJ Target Rate (APR 28)	0.10%	0.10%	No change expected

GMT	Currency	Upcoming Events & Speeches
12:30	USD	Fed's Williams Speaks at Community Affairs Conference

SUPPORT AND RESISTANCE LEVELS

CLASSIC SUPPORT AND RESISTANCE - 18:00 GMT

Currency	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	GBP/JPY
Resist 2	1.5160	1.6750	89.00	0.9345	1.0275	1.1800	0.8400	127.60	146.05
Resist 1	1.4795	1.6600	86.00	0.8900	1.0000	1.1000	0.8215	125.90	140.00
Spot	1.4742	1.6600	82.19	0.8759	0.9519	1.0854	0.8062	121.16	136.43
Support 1	1.4000	1.6200	80.00	0.8700	0.9500	1.0400	0.7825	115.70	125.00
Support 2	1.3700	1.5750	75.00	0.8600	0.9055	1.0200	0.6850	105.50	119.00

CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT

Currency	USD/MXN	USD/TRY	USD/ZAR	USD/HKD	USD/SGD		Currency	USD/SEK	USD/DKK	USD/NOK
Resist 2	13.8500	1.6575	7.4025	7.8165	1.3650		Resist 2	7.5800	5.6625	6.1150
Resist 1	12.5000	1.6300	7.3500	7.8075	1.3250		Resist 1	6.5175	5.3100	5.7075
Spot	11.5439	1.5197	6.6194	7.7704	1.2307		Spot	6.0654	5.0577	5.2964
Support 1	11.5200	1.5040	6.5575	7.7490	1.2145		Support 1	6.0800	5.1050	5.3040
Support 2	11.4400	1.4725	6.4295	7.7450	1.2000		Support 2	5.8085	4.9115	4.9410

INTRA-DAY PIVOT POINTS 18:00 GMT

Currency	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	GBP/JPY
Resist 2	1.4828	1.6727	83.60	0.8919	0.9616	1.0920	0.8162	122.51	138.36
Resist 1	1.4785	1.6664	82.90	0.8839	0.9567	1.0887	0.8112	121.83	137.39
Pivot	1.4709	1.6549	82.08	0.8755	0.9528	1.0831	0.8058	120.60	135.74
Support 1	1.4666	1.6486	81.38	0.8675	0.9479	1.0798	0.8008	119.92	134.78
Support 2	1.4590	1.6371	80.56	0.8591	0.9440	1.0742	0.7954	118.69	133.13

INTRA-DAY PROBABILITY BANDS 18:00 GMT

\Currency	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	GBP/JPY
Resist. 3	1.4920	1.6755	83.16	0.8865	0.9610	1.0997	0.8173	123.00	138.49
Resist. 2	1.4875	1.6716	82.92	0.8838	0.9587	1.0961	0.8145	122.54	137.97
Resist. 1	1.4831	1.6677	82.68	0.8812	0.9564	1.0926	0.8118	122.08	137.46
Spot	1.4742	1.6600	82.19	0.8759	0.9519	1.0854	0.8062	121.16	136.43
Support 1	1.4653	1.6523	81.70	0.8706	0.9474	1.0782	0.8006	120.24	135.40
Support 2	1.4609	1.6484	81.46	0.8680	0.9451	1.0747	0.7979	119.78	134.88
Support 3	1.4564	1.6445	81.22	0.8653	0.9428	1.0711	0.7951	119.32	134.37

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Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com

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