[LehmanBr]

EURUSD continued downward correction on broad dollar strength on Bernanke's comments from last Friday. The torrent of hawkish Fed-speak last week is likely in response to the pressure that USD has come under: the Fed is worried that a too-rapiddecline in the USD could result in investors dumping their USD holdings, resulting in higher yields and an abrupt end to the recovery. Fed Fund futures have priced in a 36% chance of 25 bp Fed Fund Rate hike in Fed's March meeting next year –surely too early, but traders anticipate that the verbal intervention could last a little longer to allow USD to regain some ground. Tomorrow’s German ZEW survey could see a quicker increase from September's 57.7. Additionally China will publish Q3 FX reserves this week: this should provide more evidence for ongoing EUR strength supported by central banks' buying. In short, while USD may stage somewhat of a comeback over the next few days, EURUSD is likely to stay within the recent uptrend channel.