Credit and Housing Markets May Deteriorate Further

Fed chief Bernanke appeared before the Senate Banking Committee hearing today, and sounded some alarm bells about the housing and job markets in the US. He said that "the housing market or the labor market may deteriorate to an extent beyond that currently anticipated, or that credit conditions may tighten substantially further". He basically reassured the Fed is open to further rate cuts ("will act in a timely manner") although that may not be necessary as he has better expectations for a better year end and 2009, especially with the just approved fiscal stimulus package.

He did say "the outlook for the economy has worsened in recent months".

Seems like the Fed has a U-shaped view about the economy now, soon and much later. Poor, then worse, then better maybe?

The US dollar was moderately down against Euro and Swiss franc on Thursday. EUR/USD's nearest resistance is around 1.4640-60, then 1.4700. Swissy's support around 1.0980-1.1000 must be watched.

As expected, USD/JPY targeted 108.60 after breaking above 108.00. 108.80-109.00 will be next resistance.