* The dollar rose on Friday, supported by Federal Reserve Chairman Ben Bernanke’s comment last night that the Fed will tighten monetary policy “when the economic outlook improves sufficiently.” This is not a big surprise to the financial markets; however, in conjunction with White House economic adviser Larry Summers’ support for the dollar, it helped the US currency today. Summers said “any idea that nations can devalue their way to prosperity is one that economic experience very much belies.” US stocks rose. The S&P 500 was up 6.01 points to 1,071.49. The euro was pressured by weak German exports. Sterling fell for the week. The Australian dollar consolidated strong weekly gains. The Canadian dollar added to weekly gains as Canada’s employment rose for a second consecutive month and the unemployment rate unexpectedly declined.
* The USD/JPY surged on Friday, reversing most of the week’s earlier losses. The pair is still in a clearly defined downtrend. Strong supports exist at 88 and 87 and there may be a renewed test of those levels. However, we believe the pair is forming a double bottom and we are long the USD/JPY. If the downtrend is broken, the USD/JPY will rally.
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