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Daily Observations: May 22, 2013 (plus Thoughts on Bernanke and FOMC Minutes)

Daily Observations: May 22, 2013 (plus Thoughts on Bernanke and FOMC Minutes)

Christopher Vecchio, CFA, Senior Strategist

Current Positions:

- Long USDCHF (1/2) from 0.9660, SL at 0.9715, Target 1 HIT at 0.9750, Target 2 open.

Closed Positions:

- Long USDCHF (1/2) from 0.9660 at 0.9750 for +90-pips.

Typical Time Frame: 1-day to 1-week

I jumped into a long USDCHF position yesterday amid a flurry of dovish comments from various Federal Reserve policy officials, despite the apparent negative implications for the US Dollar. This is for two-fold. First, the USDCHF had fallen into ascending TL support on the hourly chart, and given lower volumes in equity markets, I didn't think the move had enough gusto for a break.

Second, I find that all of the chatter re: the Fed exit is overstated and misinterpreted. At the Fed's May meeting, it was made explicitly clear that policy could go in either direction - "increase" QE was added to the lexicon - and since then, US economic data has been overall better (though only slightly).

Accordingly, in what should be more of the same, Chairman Bernanke should stick to the script today, the one that NY Fed President William Dudley was out touting this morning in an interview with Bloomberg News (he said that he and Bernanke were “in sync” on policy). That is: ‘the economy is improving, but isn’t great yet; the labor market is steadily moving upwards, but isn’t where it should be for us to withdraw stimulus; disinflation is setting in, but stronger consumption persists; and the payroll tax and ensuing budget sequestration have created quite the fiscal drag.’

Ahead of Bernanke & co today, the USDCHF surged on the back of dovish commentary from the SNB, suggesting that negative rates could be implemented. This provided the fuel my long USDCHF desired, and price rallied immediately into 0.9750, my first target. I've taken half off there, and letting the rest run against a stop of 0.9715. Overall, I'm a buyer of USD on dips. (Note: all of these trade ideas and management were first spotted in the DailyFX RTN, link below).

Are you new to FX or curious about your trading IQ?

As always, any other trade ideas and general macroeconomic musings can be found in the DailyFX Real Time News feed, or by following me on Stocktwits/Twitter @CVecchioFX.

I also host a weekly Live Trading Q&A in DailyFX Plus, on Tuesdays at 07:15 EST / 12:15 GMT, in which I delve deeper into my positions and thought processes behind my analyses.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail

Follow him on Twitter at @CVecchioFX

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.