Romney-Bernanke trade

There is increasing speculation that a Romney victory in the US Presidential election could lead to an immediate end to the Bernanke era. Romney has said that, should he win the election, he will replace Helicopter Ben when his second term ends in January 2014. Market speculation is that Mr Bernanke wouldn’t wait that long, and that he will resign before Romney could take office.

Romney would look to put someone with more hawkish credentials in the Fed hot seat and this would have a major impact on world financial markets. US equity markets would fall heavily as stimulus is removed dragging worldwide risk sentiment lower and the USD would rally as prospects of further QE are diminished and long-end US rates start to rise. Sounds like yet more reasons to be selling any AUD/USD rally!

  1. Morning Sean, what’s your feeling on EUR/JPY today?

    I’m thinking about selling at around 104.62 with SL 104.85. TP is discretionary right now as I would like to see the price action before the price hits 104.62. At the moment, it looks like TP target should be somewhere around 104.15.

  2. Morning Jones, as a purely technical trade that makes sense but I’d rather wait and see how mkt develops rather than leaving fixed orders? You’re potential s/l is very tight to the 61.8 Fibo so maybe give it a little more room? Sell 10470 with s/l above 10500 perhaps?? Just some thoughts, no strong view at moment. Good luck++

  3. Sean, The Romney win scenario you outline is quite plausible, but the market has other drivers in the short run which is the timeframe most of us trade on. One has got to decide whether one’s going to trade on fundamentals / news or on technicals. Getting the two hats mixed up usually leads to disaster. I’d much rather trade purely on technicals.

  4. The end of loose Fed policy is one possible outcome, but another factor to consider is the fiscal cliff. If Obama wins, political gridlock Washington is guaranteed. Otoh if Romney wins, there will not be political gridlock since Repubs control congress. That should remove a big worry for markets and the risk-on party will re-ignite. Add to that the US economy is slowly turning the corner (not getting worse) so risk-on might dominate. In any case, I trade the charts, they know best!

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