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Goldman Adds Short EURUSD To "Favorite Tactical Themes", EURUSD Target Dropped To 1.18

Tyler Durden's picture




 

At this point we have given up trying to figure out the squid's dodecatuple reverse psychology, especially when this call openly contradicts everything spouted by the firm's equity strategists.

The latest from Goldman's John Noyce

  • A lead indicator of EURUSD’s sharp decline from the 12th April high at 1.3692 to the 6th May low at 1.2510 was given by widening in Eurozone-periphery/-core spreads
  • These spreads have fallen off radar screens over the past few weeks due to the Eurozone “Stabilisation Package”
  • However, Spanish yields are now beginning to widen and the Spain/Germany 10-year spread is moving to new all time wides on our data
  • With this in mind it seems the risks of an eventual downside break from the recent range on EURUSD are again increasing
  • At this point the USD Index has the clearest pivots and structure from which to calculate targets…
  • …the highs of the recent consolidation are clustered 87.39-87.48. A close above that region would target 89.8…
  • …assuming an equal %age move this would target approximately 1.18 on EURUSD
  • Overall, it looks like the chances of a downside break from the recent range on EURUSD to target 1.19-1.18 are increasing
  • As a result of this we’re going to add Bearish-EURUSD to our Favourite Tactical Themes…
  • …given the 1.18 target is quite close we’d close the consider the theme closed if spot trades above 1.2355
 

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Thu, 06/03/2010 - 12:39 | 392053 monmick
monmick's picture

Intervention coming any minute....

Thu, 06/03/2010 - 12:40 | 392054 Jeanbon
Jeanbon's picture

Interestingly, today, the EUR XAU correlation, that has been negative

for quite some time now, is turning positive...

Thu, 06/03/2010 - 12:39 | 392055 BernankeFed
BernankeFed's picture

Making contrary predictions is the safest way for forecasters to be right 50% of the time. 

Thu, 06/03/2010 - 12:45 | 392075 tunaman4u2
tunaman4u2's picture

Absolutely... and they make A LOT more money than us to do it

Thu, 06/03/2010 - 12:42 | 392066 bugs_
bugs_'s picture

Could Goldman be right this time?

Thu, 06/03/2010 - 12:55 | 392100 Don Smith
Don Smith's picture

They're right in that they know the SNB or the Fed is about to step in and crush EUR shorts, of which I was one until it got below 1.22 this morning.  The pattern of intervention is just too clear.

Thu, 06/03/2010 - 13:04 | 392117 chet
chet's picture

I'm thinking the same thing.  Though this is the first time in a few weeks it's been allowed to hang around below 1.22 for this long during US hours.  That's a bit different.

Thu, 06/03/2010 - 17:45 | 392766 DosZap
DosZap's picture

bugs_

"Could Goldman be right this time?"

Just look at the members of BHO's team, and GWB's before him..........

GS OWNS the FED,Gv't.

Thu, 06/03/2010 - 12:45 | 392074 Attitude_Check
Attitude_Check's picture

Aplying my GS message encryptionalgorithm --

"…given the 1.18 target is quite close we’d close the consider the theme closed if spot trades above 1.2355"

We expect the EURUSD to hit 1.2355 shortly due to intervention by the ECB.

Thu, 06/03/2010 - 12:46 | 392077 Thisson
Thisson's picture

Following Goldman's recommendations is like doing the poison duel with the Sicilian in The Princess Bride:

http://www.youtube.com/watch?v=lA-AEuXn1eg

"Iocane powder, I can smell it!"

Thu, 06/03/2010 - 15:07 | 392453 daz
daz's picture

hahah that was good

and both poisoned.. better be far from GS :D

 

 

Thu, 06/03/2010 - 15:29 | 392504 New_Meat
New_Meat's picture

Or Danny Kaye: "Pellet with the poison..." (ed. start at ~1:30)

http://www.youtube.com/watch?v=LS75NtlH3gI

- Ned

Thu, 06/03/2010 - 12:48 | 392082 jeb3
jeb3's picture

They won't let it go below 1.2150.  This GS "Tactical Theme" just reinforces that point. I'm officially long EUR:USD (well... at least for a day or two)

Thu, 06/03/2010 - 12:48 | 392084 walküre
walküre's picture

my target for EURUSD remains 1.35

that's where equilibrium is for Germany and the US. nothing else matters.

Thu, 06/03/2010 - 13:14 | 392154 Don Smith
Don Smith's picture

I don't understand your comment.  Germany is happy to have a weaker Euro.  They gain nothing by a strong Euro.  Parity is way more likely.  The US wants a stronger Euro, but the Zone is so weak right now, it will be years before the Fed can press the dollar low enough to see 1.35.

Thu, 06/03/2010 - 13:20 | 392167 walküre
walküre's picture

A weaker Euro, yes. But not a Euro crapshoot. And neither China nor the US can afford the weak Euro or their trade balances are topsy turvy. So, I see 1.35 before 1.15.

Thu, 06/03/2010 - 13:33 | 392216 Don Smith
Don Smith's picture

I know where you're coming from, but 1.15 isn't that far from where the Euro was introduced.  I might thinik 1.35 before parity, but we'll see 1.15 this summer.  I can't say the same for 1.35.

Thu, 06/03/2010 - 12:53 | 392094 KxAlpha
KxAlpha's picture

I really do like to watch live charts. Looks like EURUSD hit the 1.2150 barrier... again.

Man, I was able to see it drop to 1.2111 few days ago, I really wan't to see when the algos start the huge selloff.

I wonder if there is some truth to the rumors that the german government over here will step down this weekend, at least the liberal democrat part of it.

Thu, 06/03/2010 - 13:11 | 392135 Trichy
Trichy's picture

That would speed things up.

Thu, 06/03/2010 - 13:22 | 392174 walküre
walküre's picture

That would be a good thing.

Grosse Koalition comes back and they have 2/3 majority to implement reforms and laws to secure austerity measures.

Thu, 06/03/2010 - 12:55 | 392101 Chemba
Chemba's picture

This proves what the informed already know: that there is no single entity named "Goldman Sachs" with a specific point of view.  Goldman employs thousands of traders, analysts, economists, etc. and they each have their own point of view and make recommendations or trades accordingly.  there is no such thing as "Goldman Sachs' point of view".

Thu, 06/03/2010 - 12:56 | 392103 papaswamp
papaswamp's picture

Wonder which GS exec will be at the Bilderberg meeting?

Thu, 06/03/2010 - 13:03 | 392116 Turd Ferguson
Turd Ferguson's picture

I'm kinda thinking they are gonna let it go thru 1.21 this time just to fuck everybody. Then, once everybody gets short at about 1.1950-1.200, the ECB will come in and shove a euro-shaped auger right up the shorts asses and drive it back to 1.2250

Thu, 06/03/2010 - 13:08 | 392128 Trichy
Trichy's picture

Ben's now offially not buying again until 1.18

Thu, 06/03/2010 - 13:09 | 392130 jd2iv987
jd2iv987's picture

time to close out the eur shorts....at least until it hits 1.25 and their price target moves to 1.3

Thu, 06/03/2010 - 13:13 | 392149 Turd Ferguson
Turd Ferguson's picture

I must admit that the euro chart looks like shit, like the bottom is about to drop out.

Thu, 06/03/2010 - 13:14 | 392153 LongGold
LongGold's picture

Goldmand says they're short EURUSD ? OK,that's it I'm going long :-)

Thu, 06/03/2010 - 13:16 | 392161 doolittlegeorge
doolittlegeorge's picture

so precisely HOW does the ECB "intervene"?  I mean I hear where you all are coming from with the US probably feeling like they need a "stable" euro to "devalue America to prosperity" but I'm looking at the Euro apparatus and I don't really see a methodology for saving it.  I mean the Euro-bond market really is tiny.  And whose gonna back any NEW paper especially on the order of magnitude that they need to issue?  We ARE talking trillions here of course.  Indeed they couldn't even save Greece which really was a "teeny-weeny" AND a no brainer.  The US could start buying euros--or "zeros" as they're now known in Germany--but it's hard to see how that would have any impact either given the US Adminstration's view towards "hard money men."  Now it WOULD be interesting if Brazil started larding up on 'em....Rumor has it they're another one with "a couple of trillion."

Thu, 06/03/2010 - 13:31 | 392206 Don Smith
Don Smith's picture

Well, for one, The Swiss National Bank has said they interven by buying Euros when the CHF gets too strong.  (see, i.e., May 19, May 20) The Fed has been fingered by a European bank official recently (some German guy, I can't remember who, but Tyler had posted it a few days ago) as manipulating the FX markets, too. When you see an 80-pip 5-minute candle, you can be pretty sure it's not some guy on his Forex.com account with his $5,000 making a trade. (that would be me)

Thu, 06/03/2010 - 14:22 | 392361 Turd Ferguson
Turd Ferguson's picture

Nice to have you on the blog but you gotta change that avatar.

Thu, 06/03/2010 - 13:21 | 392168 101 years and c...
101 years and counting's picture

Any chance GS is actually right?

Afterall, a "strong" jobs report tomorrow would strengthen the USD on the preception the Fed is getting ready to raise rates....or at least remove "extended" from their languange.

Thu, 06/03/2010 - 13:31 | 392207 walküre
walküre's picture

Yes, and all those newly employed Census workers will need massive amounts of Greek olive oil to lube up for the job ahead, then after slaving as Census workers for Uncle Sam they can afford their first BMW, Audi or Mercedes before heading off to a vacation on the Spanish beaches of Costa Brava.

 

Thu, 06/03/2010 - 13:30 | 392202 primefool
primefool's picture

Yeah - it looks possible , even likely the Zeuro is going down. But to place a stop at 1.23 and change - a mere 1-2% above current trade is just asking for trouble. Better to size the trade down appropriately and have a much wider stop - like 1.26 or so .

The big fundamental driver is if global CB reserves start to get rebalanced in favor of the Dollar. Almost 10% points of global reserves have been moved from Dollars to Euros over the past 5 years or so. Thats a lot of dough if it tries to move back to the ratios that prevailed 5 years ago. That alone could drive the Euro well below parity - over time. But very short term - who knows - hedge fund trading/CB interventions etc etc could easily drive it up a couple of handles - no sweat. Thats why the wide stops are needed.

Thu, 06/03/2010 - 13:37 | 392228 primefool
primefool's picture

The next big area where I think a lot of "smart money" will go to die - Asian and emerging market currencies. There seems to be a pretty strong consensus that Europe and the US currencies are kind of doomed - but Asian currencies are some kind of haven. I suspect this theory will be expensive to lots of "smart money".

I think Asia will continue to experience accelerating inflation ( already around 10% in India, 4-5% in rest of Asia). Their interest rates are too low and their CBs have for too long pursued weaker currencies to sustain exports. The low interest rates have led to big property bubbles. The weak currencies are leading to very high inflation. They will be forced to raise rates significantly as their currencies start falling more rapidly- this will be the next "conundrum" .

Thu, 06/03/2010 - 13:46 | 392252 three chord sloth
three chord sloth's picture

At this point we have given up trying to figure out the squid's dodecatuple reverse psychology, especially when this call openly contradicts everything spouted by the firm's equity strategists.

I don't think the squid has a strategy anymore. They're as lost as the rest of the big boys in gov't and Wall Street.

Oh sure... they've got the micro figured out -- they can make money from their clients every day, all day long. But at the macro level they've got no idea when things are gonna break, nor where the rupture will occur. Their long term predictions are just thrown darts.

Thu, 06/03/2010 - 14:30 | 392380 metastar
metastar's picture

The squid is slippery. It tells truths then lies all enveloped in an ink filled cloud of confusion designed to keep its prey off balance. Then, when the time is right, it latches its suction grip onto the market suckers and sucks them dry!

 

Beware all ye who tangle with the squid!

Thu, 06/03/2010 - 14:35 | 392393 ldotf
ldotf's picture

oh, Goldman says 1.18? buy buy buy!

Thu, 06/03/2010 - 15:00 | 392446 The Alarmist
The Alarmist's picture

So that means that Goldman is long the Euro and we can expect 1.27 by next week.

Thu, 06/03/2010 - 15:11 | 392460 RockyRacoon
RockyRacoon's picture

Interesting theory as to why there have been no criminal complaints for the TBTF "banks":

On March 29, 1989, financier    Michael Milken was indicted on 98 counts of racketeering and fraud relating to an investigation into    insider trading and other offenses. Milken was accused of using a wide-ranging network of contacts to manipulate stock and bond prices. It was one of the first occasions that a RICO indictment was brought against an individual with no ties to organized crime. Milken pled guilty to six lesser offenses rather than face spending the rest of his life in prison.   On September 7, 1988, Milken's employer,     Drexel Burnham Lambert, was also threatened with a RICO indictment under the legal doctrine that corporations are responsible for their employees' crimes. Drexel avoided RICO charges by pleading    no contest to lesser felonies. While many sources say that Drexel pleaded guilty, in truth the firm only admitted it was "not in a position to dispute the allegations." If Drexel had been indicted, it would have had to post a performance bond of up to $1 billion to avoid having its assets frozen. This would have taken precedence over all of the firm's other obligations—including the loans that provided 96 percent of its capital. If the bond ever had to be paid, its shareholders would have been practically wiped out. Since banks will not extend credit to a firm indicted under RICO, an indictment would have likely put Drexel out of business. Is this really what is behind too big to fail prosecution?

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