This page has been archived and commenting is disabled.
The Euro Has Turned
The call that a turn in the dollar was imminent by Brown Brothers Harriman’s Mark Chandler is looking more prescient by the day (click here for the call). September and October was all about pricing in Ben Bernanke’s quantitative easing, and that is looking pretty much done. The next play in this soap opera will see “uncertainty” emigrate from the US to Europe, sending the dollar off to the races and the Euro in for rehab. Lindsay Lohan, eat your heart out.
A reemergence of the “PIIGS” disease, concerns about the deteriorating quality of the lesser sovereign credits in Europe, is now unfolding as the triggering event. US interest rates rising at the long end are adding fuel to the fire, shifting interest rate differentials overwhelmingly in Uncle Buck’s favor. It also helps that 95% of traders are bearish on the dollar, the surest indicator you’ll ever see that it is about to go the other way. To quote hockey great, Wayne Gretzky, “You don’t want to aim where the puck is, but where it’s going to be.” While America’s trade deficit remains massive, that shortfall is being overwhelmed by enormous amounts of foreign capital pouring into our stock and bond markets, on which Ben has painted a giant bullseye.
It all adds up to the $1.4250 print we saw on the Euro two weeks ago marking the high. Rallies from here in the European currency are to be sold. Players new to the space can achieve this through buying the (EUO) ETF, a leveraged 200% short bet against the Euro. Looking at the charts and the momentum, we could see a plunge below $1.33 by year end. Analysts are targeting $1.17 sometime next year, which would out the EUO at $24, a tidy 24% potential return. Overshoot could take us as low as $1.10, taking the EUO to $26 and a gain of 37%. Don’t go on this date without protection, so keep a stop at $1.42.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
- advertisements -
HitTheFan,
This is old, as you point out, it has also already been posted previously here on ZH.
Bernankes ultimate nightmare...an unstoppably rising dollar.
MHFT probably has this right. The Euro looks like shit and probably should be sold forever. But i don't like this trade. There is more risk than what appears.
Just asking all you FX traders out there how you would trade this news:
SPAIN, PORTUGAL, GREECE and IRELAND to opt out of EURO. TO ADOPT OLD CURRENCIES.
The Euro would be 1.5 in about 5 seconds.
Be careful with FX. If you can't trade 24 hours a day, then don't trade it. This is not a layup, and "stops" will do you no good. There is very big "weekend risk"; you have no clue what might happen. There is a big "gap risk".
Keep in mind that America is still hell bent on devaluing the dollar. Bernanke has more money than the ECB.
Disclosure: I have no positions in FX at the moment (haven't for a month now). I'm too scared.....
It is no different than the gap up in the EUR last Sunday. It got filled, too.
You don't have to trade twenty-four hours a day. Use longer time-frames, small positions and set it and forget it. Trade from extremes to the BBMA on the H4 just to get a trade in. :D
You're not making as much using small, unmonitored positions but at least it makes you not afraid.
:D
Orly, Did this for many years.
Count on four-five tradable moves a year. By that I mean something you can ride up or down in a relatively short period of time and make 5%.(100% return with leverage)
EURCHF gave us that for a good ride. As of late it is off trend and a money loser. USDYEN the same. Steady money, now a stay away. Being short Euro one year ago (1.51) was great for a while. But it has been dangerously choppy for months now.
My point is that in FX you want to be out of the market more than you are in. Don't day trade this. It will wear you out and beat you up.
Thanks for the advice. :D
How is Zsusanna?
Bruce Im not sayin youre wrong, indeed Bernanke is hell-bent on devaluing the dollar. But to say 'Bernanke has more money than the ICB'? I dont see it in reality, we've passed the point where 'bailing out' has any effectiveness, who the hell is that fooling, and China just said 'no more devaluing your debt by printing' with the launch into the setting sun didnt they? Thats the way I see it anyway.
Oh and Wayne Gretzky played the game with a Vagina in his pants so please, don't use Vagina athletes to make a point. Use someone with balls, unless you're one of those sand in your vagina hockey fans.
If you can't appreciate Gretzky's grace and abilities for the game (not to mention, brought interest to LA as before nobody gave a shit about hockey there, much like today) then you simply do not know what to look for in an excellent all-around hockey player.
Who, in your fine opinion, would you consider a hockey player with balls?
CORRECTION BIG SHOT
Wayne Gretzky said "You don't want to go where the puck is, but where it's going to be."
If you're going to use a quote, you could at least make sure to get it right!
IMHO I had a new bull signal on the USD daily on 11/15 - Gold had a new bull signal trigger on 11/22 as well - the signals are usually pretty good and often mean are followed by weeks to months of up. No targets on these signals, just a relatively tight stop.
FYI Euro turned negative on 11/8 on the daily for me.
Of note recently as well - I had new daily bear signals on Wednesday 11/24 for the Dow and the Financials? - it will be interesting to see how that plays out...
My long term indicators continue to warn of weakness for the EURO and strength for the DOLLAR.
http://stockmarket618.wordpress.com
The EURUSD may have turned along a bottoming trendline on the Daily. All this week, it loked like the air-brake was put on and, right on cue, the pair began to retrace along the trendline.
The USDJPY looks to be topping at this level as well. Your dollar strength will have to wait for another round of a ramp in the SPX/stock markets, I am afraid. I expect the USDJPY will retrace its all-time lows (at least to 80...) before bouncing back to infinty.
Monday is going to be interesting.
:D
Bernankes ultimate nightmare.
the only sure thing about forex is that its rigged by the big players. Consider Goldman Sachs, who are calling for euro at 1.55
One day the Euro is worthless, than it is dollar that is worthless....
On today evidence, they are both worthless, and its time to buy physical gold and silver until you can find it for sale
That's what I have been saying forsome time now. the Euro and the US$ are like the Devil and the Deep Sea. The only place to keep your money immune from the manipulations of the Bansters is Gold and Silver.
Currency notes that one holds is someone else's liability. Gold and Silver are real assets.
The big question is how much in todays dollars will gold be worth?
Friendly tip: If you want to trade currencies or commodities use the futures markets - its not hard. These inverse ETFs are toxic. You may be right on your call and still lose money - do some simple arithmetic to convince yourself:
Monday: underlying goes up 10%, double inverse goes down 20%
Tuesday: underlying goes down 10%, double inverse goes up 20%.
Please calculate your return over the two day period for a)the underlying and b) the double inverse etf.
The Euro??
Isn't THAT some 'make believe, lets pretend' money-token.....like synthetic "European speak" Esperanto....waste of time, leave THIS Forex to Goldman/Morgan/Citi...no money in this for the Retail Trader
...there is no trend on which we can depend...
Yes, it's a make believe, let's put faith in some paper, currency.
Much different from the U. S. dollar.
the european central bank has responded that it will print money as a respone to these issues.
this would be bullish for gold but probably not in the short term as the USD has more effect on the spot price.
Thoughts bitchez?
The Central Banks are doing all they can to suppres gold, margin requirements etc. It only means we have a few more months to add to our gold holdings
Instead of trading with the poster boy for theta that is the leveraged ETF EUO, one should consider setting fire to one's money. It's faster.
+1000. Honestly you might as well open a futures account, the margin they give you can be the same as the leverage from the ETF except youre not getting fucked in the ass by the fluctuations which destroy your returns in the long run.
The fundamentals between USD / EUR might appear to be changing, and we are seeing lower highs & lower lows on the chart, but has the SWARM OF LOCUSTS (aka hedge fund traders) turned?
Market behavior =! Macroeconomic behavior
The herd is actually agreeing with MHFT. This must be a contrary indicator. :D
The decoupling theorists will be out in force on this one. Dollar up / gold down?
We shall see...
That was a good call - looks like the dollar might have a ways to run here - still looks pretty bearish over the longer term but could go on a bit of a tear in the next few months. It is not always a certainty that gold goes down when the dollar goes up - it is conceivable to me that they both head higher here together.
i hope you're right. gold will go down, i'll buy more, then that shit will hit the usa.
Lemonobrien,
The Euro weakness relative to the USD may cause gold weakness on certain days, but it is not likely to cause overall gold weakness, as gold it more inportant as a flight to safety asset than the dollar. Look at the chart of USD/EUR from January of '10 to June of '10. While the Euro crashed from $1.45 down to sub $1.20, gold added $150. Dollar weakness is the fastest path for all commodities to rise, but dollar strength due to "flight to safety" issues, will still drive gold to new highs.
Disclaimer: long physical AU
probably. GBP might be the better short IMHO, as it has not moved down as much as EUR in this recent bout. trade spoilers could be military escalation that adversely affects US; other central banks moving to currencies outside USD.
I'm sure this is an old post from MHFT?
I mean, the Euro was already at 1.33 when this was posted, and is now below that level, so the year end prediction has already arrived.
Things are unravelling fast over here in Europe. High risks the Irish might not pass their budget. Equally high risk it will be overturned in the New Year by a new Govt, and they'll default instead. And ditto for Portugal too. And Spain. These guys have no stomach for 10 years of austerity to keep bankers in luxury.
The Euro is finished, short down to 0.80.
"...moving to currencies outside USD. "
By 'currencies outside USD' are you referring to those sans counterparty liabilites?
If so: yah, I can see that. Shit, I have already, most recently just the other day!
I believe it's known as "divestment while the divesting is still good"!