Your Currency Trade on Bernanke's Speech
Fed Chairman Ben Bernanke promised no specific action in his Friday speech, and this strategist has a plan for trading on the talk.
From the buildup to Fed Chairman Ben Bernanke's speech earlier Friday, you would have thought an eleventh commandment was coming.
But lo and behold, while Bernanke "did give a nice speech today covering what monetary policy has done since 2007," says Andrew Busch, global currency and public policy strategist at BMO Capital Markets, "he really didn't tell us anything new."
Busch told CNBC's Mandy Drury that he thinks Fed officials are "going to keep their powder dry until after the nonfarm payrolls, and after probably mid-month when the German constitutional court rules" on the constitutionality of the bailout fund.
And that, he says, will be good for the dollar relative to the euro. "The way I'm trading this is disappointment for not only Bernanke for also for the European Central Bank next week" at its regular meeting, where many analysts are expecting some action on the debt crisis. "That's why I want to continue selling euros until proven wrong."
Busch wants to enter a short euro trade at 1.2625, setting a stop at 1.2725 and a target at 1.2325.
Abigail Doolittle, founder of Peak Theories Research, likes the trade in technical terms, and points out that the stop at 1.2725 is key. She also says a lower target is supported by "a large bearish head-and-shoulders pattern."
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