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FX Charts That Matter: The Screaming EURUSD Spot-2 Year Fwd Swap Spread Convergence Trade

Tyler Durden's picture





 

Goldman's John Noyce once again confirms that he is the signal to Thomas Stolper's endless noise (pun intended). After Goldman did its traditional flip flop yesterday on the EURUSD, Noyce has been steadfast in his position on where he sees the euro. Indeed while Stolper was chasing the bouncing ball, and recommending every nano-uptick, and bailing the second there was a more than 10 pip pullback, Noyce actually has had some actionable long-term advice. That said, with Noyce's report coming out on Thursday ahead of Friday's EURUSD rout, he did provide some critical resistance pivots that appear to have been sustained, and it seems the interim top in the EURUSD is now fully in place even based on technicals (as for fundamentals, should the North Africa crisis jump across the Suez and hit Jordan, Syria or Saudi, watch as the scramble to cover dollar carry shorts goes into overdrive).

Technically speaking, the 61.8% retrace resistance from November of 1.3740 has held and it appears there is much downside from here, with firm support in the low 1.30s, and possibly as low as a the January 1.28 lows. On the other hand the spread between spot and the 2 Year EURUSD forward continues to be very wide. Without taking a directional bet, a convergence between the two legs would certainly seem like an attractive trade for those who can put it on.

Yet one trade which appears like a slam dunk here is a compression between the EURJPY and its 2 year swap spreads. The divergence is several 6 sigma intervals wide, and is a screaming compression trade here.

Full presentation from John Noyce

Charts That Matter 1.28

 


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Sat, 01/29/2011 - 13:33 | Link to Comment Careless Whisper
Careless Whisper's picture

when can we see the SECRET internally circulated charts and recommended trades?

the publicly released docs are garbaaage.

Sat, 01/29/2011 - 13:42 | Link to Comment Malcolm Tucker
Malcolm Tucker's picture

Here is a video of the Saudi Protest today !!

http://fedupmontrealer.blogspot.com/2011/01/jeddah-protest-jan-29-2011.html

 

Sun, 01/30/2011 - 09:34 | Link to Comment kokoro33
kokoro33's picture

the SECRET internally circulated charts are right here:

http://www.flickr.com/photos/53445012@N06/

 

the publicly released docs ARE garbaaage.

Sat, 01/29/2011 - 13:59 | Link to Comment Rick64
Rick64's picture

Information and misinformation, sometimes hard to tell the difference and is probably just how they like it.

Sat, 01/29/2011 - 14:27 | Link to Comment Buyemall
Buyemall's picture

What happened to kostin's weekly chartology and portfolio strategy?I found both very useful.

Does it have to do with him becoming a partner?

 

 

Sat, 01/29/2011 - 14:53 | Link to Comment Tyler Durden
Tyler Durden's picture

Watermarking. Send us email.

Sun, 01/30/2011 - 01:20 | Link to Comment Dirtt
Dirtt's picture

Watermarking?  So exactly how many parallel worlds must we contemplate?

It's all good.  ZH is one of the most valuable public services since the USA had shit shovellers at the Post Office.  The thought of getting mail once a month is getting more attractive by the hour.

Sat, 01/29/2011 - 14:45 | Link to Comment raya123
raya123's picture

The euro will keep dropping through the first half of this year, as will equities.

http://finance.yahoo.com/news/Euro-Six-Month-fxcm-3256766078.html?x=0&.v=1

Sat, 01/29/2011 - 16:32 | Link to Comment topcallingtroll
topcallingtroll's picture

Goldman is a totally worthless parasite piece of shit, and I am trying to be diplomatic about it.  The only alpha they have is from cheating and various forms of insider trading. 

Sat, 01/29/2011 - 18:20 | Link to Comment ZeroPower
ZeroPower's picture

Didn't make the SA class huh? Better luck next time.

Sat, 01/29/2011 - 18:37 | Link to Comment Just_Another_User
Just_Another_User's picture

Once again.... thanks for sharing. Much appreciated!

Sat, 01/29/2011 - 23:17 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

 

this is wonderful. 

as long as the rubber bands keep loading and unloading, and the central banksters keep pouring liquidity into the bucket with a little hole in it called central planning/deficit financing/waste/corruption/fraud, at least.

maybe i'm just feeling a bit eleven o'clockish, tyler, but those rubber bands kinda look like they've had it, to me.

and, in the interests of disclosure, i felt the same way in 1971, too.

i couldn't do anything about it, then, either, except self-medicate, one day at a time, and live my little life without television, hoping that when the cosmic flyswatter hit, the universe would have arranged it so i was standing in one of the holes.

 

Sun, 01/30/2011 - 01:16 | Link to Comment reinibe
reinibe's picture

Europe is on the way to solve their problems temporary. They just do the same like US do: QE.

That works temporary, and there IS a room for EUR/USD above 1,40. So, temporary EUR is a good currency to have. But watch it closely… to avoid the unavoidable EUR-crash.

…We watch it closely and we Invest in HiYields. PERFORMANCE  this year:  Jan 3 – Jan 28: in EUR: +1.81% in USD: +3.67% http://bit.ly/hg9TSJ

http://twitter.com/#!/lowrisk007

 

Sun, 01/30/2011 - 01:39 | Link to Comment scratch_and_sniff
scratch_and_sniff's picture

Euro put in a 1%+ gain on over 15 currencies last week, 10 if those were over 2% in gains. I agree that some kind of technical correction beckons, but next week we have German retail sales, Trichet speaks on tuesday (most likely questioned thoroughly about inflation fears), PPI on wednesday which will confirm his fears, then a rate decision on thursday(not going anywhere but you get the idea). Who wants to be short again?

Sun, 01/30/2011 - 02:36 | Link to Comment Itsalie
Itsalie's picture

So the big boys continue this yo-yo game to divert attention from the total rut of the bankruptcy of the whole world's financial system - 6 months euro down, next 6 months euro up; so momos can chase, fundamental investors can make some investment calls to justify their existence, and both the risky-assets like stocks and commodities and "riskless" assets like "bonds" do not all plunge into the abyss all at once. The lively debate here, inflationsts pro-commodities, others pro-stocks, deflationists pro-bonds, etc, are all playing into the hands of the master illusionists. Take your wealth off the paper assets, buy something that mankind will need like agriculture land near a safe water source, learn to farm, and watch the long and turbulent winter finally start; it might last a few decades.

Sun, 01/30/2011 - 12:21 | Link to Comment Grand Supercycle
Grand Supercycle's picture

I remain short Euro.

The Dollar rally gets closer...

http://twitter.com/GrandSupercycle

Sun, 01/30/2011 - 19:12 | Link to Comment Yen Cross
Yen Cross's picture

 thank you for the great post. There are a lot of intraday traders and out there. So this info could be conflicting short term. Also margin management is key to successful trading. Good luck every one. Take a look @ the cot charts and, and short term commodity futures if your playing a risk trade. As I suspected. The USD is holding it's own in the Asian session. I suspect some good moves in European/ London session.

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