Gary Deduke

[B]September 20, 11:00 AM New York: [/B]Fed Chairman Bernanke testifying at the House Financial Services committee along with Treasury Secretary Paulson regarding the subprime crisis and the Fed’s most recent response via the aggressive slashing of the overnight lending rates. The most salient remark is Bernanke’s explicit acknowledgement over further extent of housing woes, suggesting that “soft house prices and rate resets mean that ARM delinquencies are likely to rise further”. Furthermore, the Fed chairman revealed a much more pessimistic and uncertain “iceberg scenario” implying difficulty estimating future foreclosure rates. The chairman goes on to echo this week’s rate cut accompanying statement by saying that “recent developments have increased uncertainty around economic outlook (with the) rate cut aimed at forestalling adverse economic effect from financial stress”. Overall, the increased awareness over the rising risks and the expressed activist position to the Fed’s role in helping to resolve the housing crunch seems to detract from the “one and done” scenario in terms of rate cuts, suggesting a more concerted pre-emptive monetary easing in months to come. What does this mean for US Dollar? More gradual depreciation against the commodity fueled AUD and CAD - something that we were very vocal about this weekend at the FX expo and that we see materialize in the markets in the aftermath of aggressive cut.

[B]Confidence Rankings:[/B]
1 AUDUSD: Near Term: Bullish Medium Term: Bullish
2 EURUSD: Near Term: Bullish Medium Term: Bullish
3 USDCAD: Near Term: Bearish Medium Term: Bearish
4 GBPUSD: Near Term: Neutral Medium Term: Neutral
5 USDJPY: Near Term: Neutral Medium Term: Bearish
6 USDCHF: Near Term: Neutral Medium Term: Neutral
[B]AUDUSD [/B]has maintained its momentum after the surprising 50 pt cut by the Fed, reflecting its undervalued and oversold status. Former resistance above .8850 is the obvious first target with consolidation and renewed strength likely to follow.
[B]Short Term: [/B]Bullish
[B]Medium Term: [/B]We are looking for a retest of 0.88, and depending on the resistance, a subsequent push to 0.90.

[B]Trading Blotter:[/B]
No open positions at this time.