• New York Fed: Test of tri-party reverse repo infrastructure should not be taken as a sign ready to tighten rates. Interest rates dipped intraday on news, helping weaken dollar
  • Bernanke: Sense more urgency among G20 on global imbalances; warns surplus nations to up domestic consumption, make currencies flexible. Says US fiscal exit strategy important to preserve confidence in US economy, dollar. Asia leading recovery but must be wary of asset bubbles
  • Austrian FinMin: EUR/USD, EUR/CNY not a focus now; will be in a few months when crisis passed
  • NAHB builder sentiment dips to 18 in October from 19 in September
  • ECB’s Bini-Smaghi: No need to raise rates for time being
  • Oil rallies to $79.69; closes at 79.61 in pit trade;Gold rebounds to $1061
  • S&P 500 rises to 1097 as dollar falls, market awaits AAPL earnings; US 10-yr note yield falls to 3.39%

EUR/USD rose to 1.4965 as with the dollar unable to take much strength from Bernanke’s comments on the need for greater domestic demand from Asian surplus nations as well as pleas for US fiscal restraint. The market focused on his comments that Asia was leading the global recovery, helping boost AUD to fresh trend highs at 0.9281. AUD absorbed profit-taking from Asian central banks as well as from US real-money accounts. Protection of 0.9300 barriers continues to slow rallies.

EUR/USD dipped from 1.4965 midday highs and dipped into the 1.4930s late in the session. Protection of 1.5000 barriers continues limit the market’s appetite as it awaits a fresh bullish catalyst. 1.4900 contained dips in New York.

Cable shrugged off overnight weakness on talk of more QE and rallied to fresh trend highs of 1.6423 in New York trade. Medium-term GBP shorts continue to cover amid a brightening technical outlook. Note the potential for a bullish cross in the 10 and 21-day moving averages in the days ahead.

USD/JPY saw early selling from US real money accounts as interest rates dipped on the short-end of the curve after the New York Fed comments. Activity was light in USD/JPY. 90.40/90.99 was the range.