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Tag Archives: Bernanke

I decided on October 30th to buy some overnight options or 2 day options as I was going out to play golf the next day.

The options bought was: –

EURUSD Put Option; Spt 1.3765, BE 1.3713, Premium 52bps

GBPUSD Put Option; Spt 1.6054, BE 1.6107, Premium 53bps

The above trades were to play up to the ADP, more importantly, to potentially capture FOMC.

Was the FOMC statement and thereafter the press conference by Bernanke………..staged?!

Why was the FOMC statement so lethargic and uninspiring, and then, the monumental statement by Bernanke where he for the first time announced timelines for the tapering of the QE; beginning year end and into 2014 with full withdrawal by mid 2014.

Wow………what an aggressive statement by the Fed Chairman when all previous times, he was skirting the issue.  Of course, he tried to culture the statement by saying that it is all data dependent.  Kind of like shooting someone first and then saying, let’s send him to the hospital so that he may or may not have a chance to live.

What is interesting is that the Fed also decided to change their two loved targets of inflation and unemployment.  Previously, the Fed had definitive targets of 2% for inflation and 6% unemployment rate before triggering tapering QE.

Now, they have changed specific targets to range targets; inflation has changed to 1.4% to 2% and unemployment rate 6.5% to 7%.  Let’s not forget that inflation is now at 1.1% and unemployment at 7.6%, so we are not so far from the range targets.

Is the Federal Reserve orchestrating the imminent tapering of QE because they are now worried about the fact that liquidity is not sufficiently moving into the real economy but instead is fueling real estate, equities and bond markets.

If the last three days was not a taste of the carnage to happen when the first installment of the cut in QE happens in October, we will definitely see widespread bloodshed at that time.

Time for me to do an update on the 2 month EURUSD call option that I  did back on 24 April 2013.  My cost was 185bps and the breakeven was  1.3175, the current spot of 1.2895, appears to be still very far from my  levels.

There is a real possibility that I  may have made a wrong call on this one and then again, I  may not, it’s really hard to say right now.

The tide which was very bullish USD may be turning this week and we might see the return of the bulls for EUR, GBP and AUD.

Mid week is going to be critical, Wednesday is the release of the BOE’s policy minutes, and also Bernanke speak on that day.

Thursday is crucial as fresh numbers on the flash PMIs will be out.

Friday is when Draghi speaks.

My hunch tells me that we will see alot of action and volatility in the latter part of the week, favoring a weaking dollar.