The market was looking for the Bernank to be ambivalent in general, maybe focus on the policy settings differences between tapering and interest rate hike, set the scene for eventual tapering in Q4. While these expectations were largely met, Bernanke also gave an optimistic outlook for the US economy, and clarified that 7% unemployment was the trigger level for any tapering to begin. I listened to the end of the FOMC meeting and the Q&A session after, and it was really more-than-expected optimistic tone that made the difference.
The markets roared, the USD soared.
Unfortunately I was not ready and too late to act on the first impulse, but started building USD long positions after the close of the Daily. I've gone long USD vis-a-vis EUR, AUD, GBP and even a little CNY for shits and giggles.
Here's the damage on the DXY:
Looking at the chart, it would seem there is still a fair bit of upside to come, I'm guessing over the next 10 to 15 trading days. The market's attention is now firmly fixed on tapering in September, and it would take some pretty bad USD data to turn this ship around.
Gold got hammered by the FOMC meeting, it cracked $1300 briefly. China too is having some troubles, their overnight repo rate hit 25%...the likes of which haven't been seen since the GFC of 2008. So all in all, everything points to risk off for the next while. I want to test my resolve in holding this trade as a macro trade, scaling in on winning positions. Let's see how far the ship can sail on this one.
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