By Cornelius Luca, BridgeNews
New York--Jan. 25
Expectations that Federal Reserve Chairman Alan Greenspan's testimony before the Senate Budget Committee at 1000 ET will improve optimism that a hard landing will be avoided after all sent the euro spiraling on long liquidation. The euro fell to a five-week low of 91.15 cents, three-week lows of 106.73 yen and 0.6293 sterling, and a 15-day low of 1.5225 Swiss franc.
Greenspan is expected to show greater receptivity to tax cuts to aid the slowing U.S. economy.
* * * The Wall Street Journal speculated that the Fed might cut rates by only 25 basis points, rather than the previously assumed 50 basis points at next week's FOMC meeting.
Dollar/yen remained on the sidelines, slipping within Wednesday's range.
Dollar/Swiss franc mirrored by climbing to a five-week high of 1.6720, while sterling/dollar extended its losses to reach a six-week low of 1.4473.
Meanwhile, dollar/Canada drifted higher within Wednesday's perimeter. Adding excitement to the session is the release of the cost of employing an American worker, which is expected to have risen 1.1% in the fourth quarter due to the rise in the average hourly earnings reported in the last few months.
Gains in the index should point more toward an economic slowdown rather than a recession, but it will be bad news for profit margins.
The outlook for euro/dollar remains bearish after reaching 0.9145, target of double top formation, and 0.9136, 61.8% Fibonacci retracement level of the June-October downtrend. Dollar/yen is mixed to slightly bearish.