Goldman Flow Now Selling EUR Outright, Advises Leveraged Accounts Are Caught Wrong Way In EUR Collapse

Tyler Durden's picture

Some very disturbing commentary for the EUR bulls out of Goldman sales desk (these guys are the real deal, not the institutional sell side idiots who can't hit an elephant from 3 feet with a bazooka), which is now outright bearish on the EUR: "We’ve been better EUR sellers to the tune of half a yard, mostly technical accounts. Leveraged accounts are not participating in this move for the most part, and if anything, they have been caught the wrong way around." Which means that should the collapse continue, the margin calls will come in, and the EUR longs will go the other way, putting increasing pressure on the EUR pairs, and likely forcing the SNB to do the inevitable. Look for more EUR pain overnight.

More from Goldman's David Clark:

Yet another reason to have sold EURs today. EURUSD has dropped nearly 2 big figures in the last 24 hours and is closing at the lows. EURCHF makes new all-time lows. EURAUD revisits levels not seen since 1989 – particularly interesting on a day when equities are down 1%. We’ve been better EUR sellers to the tune of half a yard, mostly technical accounts. Leveraged accounts are not participating in this move for the most part, and if anything, they have been caught the wrong way around.

And some observations on deteriorating geopolitics from Goldman's Natacha Valla:

Strike in France, sounds familiar? Estimates vary between 1.1 (interior ministry) and 2.5 to 3 (unions) million for the number of people in the streets today for the first general strike to protest against the proposed pensions reform. In short: (i) Either way, this is a lot and can be considered a success for unions. (ii) Given today’s sizeable turn-up, the government is likely to propose to soften the edges of the reform and get away with it (eg on specific regimes for physically-tough jobs) while keeping the core intact. The President and the PM have already made statements in this direction today. Overall, be braced for more of this in September.
Prospects for French sovereign debt? France currently enjoys a honeymoon with markets – its spread to Germany is minimal (see chart below). Yet, the country’s track record in managing public finances and the shape of long-term government liabilities (see chart below) do not look great. Overall, at the time we speak, we can still give the benefit of the doubt to the current government, as it has said very loud its commitment to turn the situation around. Whether or not this will happen will depend on its ability to keep a firm hand (and/or make wise concessions) through what promises to be a shaky September. A disciplined budget won’t suffice, structural reforms (starting with pensions) will be key.
Recall that our Global Markets team has initiated a couple of trades involving France in the sovereign space (10-yr Italy against France, and Spain vs. France). See Francesco Garzarelli’s latest mails and his Bonds Snapshot of September 6th for more details).
Watch out for developments in France – things might move fast.
A couple of charts:

All in all, the pleasant myth about Europe is unravelling. As Tim Backshall pointed oh so wisely, the choice is simply: default now or default later.


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bugs_'s picture

Could Goldman be right this time?

Getagrip's picture

Look what happened in 08. Everything melted down except USD and treasuries. The Fed has a lot of treasuries that need to be bought. Dollar/treasury melt up coming to a theater near you...soon.. 

Vampyroteuthis infernalis's picture

Ding ding ding, we have a winner! R.I.P. Euro, R.I.P. socialism

moneymutt's picture

I thought we were socialist now, if were socialist, Europe, far to our left, must be the former USSR or soemthing further to the left.

barkingbill's picture

you guys are talking out of your armpits. 

barkingbill's picture

what the protests actually show is that people in france have enough balls to stand up to their government and the corporations robbing and plundering while they downsize and streamline, and get so lovely efficient and can rob some more. 

Goldenballs's picture

+1,000,000.Forget the Socialist crap,this is about living standards and having a decent quality of life,in fact if the elites have their way its about having any quality of live.As in working into your 70,s,having any security or rights in the country you were born in,working to pay taxes to pay the debts of others and carrying on the fiat ponzi scheme.Seeing anything in political terms defeats the object at the moment,unless a united front is shown the politico,s and banksters will do what they want and further down the line it will be a lot uglier.The elites want a divided population so there is no opposition to the "crime of the century"


Eternal Student's picture

Exactly. So much for the claims that the dollar was going to crash this month, and we were going to see hyperinflation.

Last September, the Inflationistas struck out with their claims of massive inflation. This September looks like it's going to be a bust for them again.

Voodoo-economist's picture

a strong dollar isnt really spaeking for treasuries? Its easier to sell them at a lower price, no?

rocker's picture

Thanks Tyler  for another great scoop.

Me thinks Goldman is "Done Doing God's Work."   U.S. Markets follow the Euro.  

americanspirit's picture

A broken clock is right twice a day

liberal sodomy's picture

euro going the way of the dodo bird.

Hephasteus's picture

Gold price in euro's. Gonna get ugly.

TooBearish's picture

Dammit another buy signal.

CPL's picture

I was just thinking the same thing after reading the article.


Going to keep a eye on FAS tommorrow for a first 15 minute open drop and then the rocketship pop chart.

papaswamp's picture

Is it me or is there a muted panic going on? Gold and Silver shot up, the FX market is going nuts, BHO has proposed about $600 Billion in new stimulus (add them all together...don't forget the R,R,R is a $350 Billion project (50 bil is just the initial))...European default and debt issues are looking even worse. Several satellite countries need money (Moldovia $115 Mil/Belarus $2.2 Bil)....the tension just seems to be escalating.

TooBearish's picture

Plenty to panic about one wants to be short it seems.

Getagrip's picture

As Kramer said- Ohhhh..I'm tense

moneymutt's picture

maybe, but there is also a lot of QE money leaking out into speculation (not unfortunately to regular economy) so this money sloshed to and from currencies, oil, gold, stocks its hard to tell if its panic away from things or a rush towards the next bubble.

tom's picture

When don't Moldova and Belarus "need money"? Is there anyone left in Moldova? I thought they all left for the greener grass of ... Romania.

Nihilarian's picture

New Normal for the French: "Oui" is now "Iou", bitches.

Number 156's picture

Keep an eye on CNBC - Watch them panic. The producers will be trying to hold a narrative in the face of the obvious. Watch as they kick more and more guests off the show. Or they will restrict the guestlist to Krugman clones.

bugs_'s picture

A new half hour show - I could fix them up "Fast Panic"

Hephasteus's picture

Attack the panic. Always be thinking panic attack, panic attack.

DavidC's picture

"euro going the way of the dodo bird."

What, and the dollar isn't? it's a race to the bottom. If the dollar doesn't fall, the Fed is done for.


liberal sodomy's picture

Want to help me bury a silo of wheat?

CPL's picture

Trust me, buy a Mall in Northern New York and fill it to roof.  Nobody will ever know it's there.


//google abandoned malls US North East, facinating how awesome the 80's were in terms of making giant malls and how fast they collapsed.

Battleaxe's picture

What will Goldman say next??????!

firstdivision's picture

[OT] Epic battle in the ES at 1090 tonight.  Me thinks if 1090 gets taken out, we will have a ~2% fall tomorrow.[/OT]

Getting on topic, I have to say it is clearly evident that the Euro will be the new, colorful, toiletpaper that we will be using in the near future.  If France does run into some issues with this strike, it will easily cause the Euro to fall off a cliff very quickly.  Let us see how the MSM sweeps this under the rug...another round of "new and improved" stress tests?

MrSteve's picture

It is disrespectful to mention toiletpaper and the Euro as you have done. TP has significant value. Everywhere, governments are the only ones who put ink on paper and cause it to lose value.

bobert's picture

What's going to keep the fed from increasing it's portfolio to $3T, then $4T etc., into infinity?

What will cause them to want to sell. Ostensibly (altruistically) to keep inflation in check? Will they be selling their portfolio at a loss at this point? How do you have a loss on something that cost you nothing?


hedgeless_horseman's picture

How do you have a loss on something that cost you nothing?

Now that is something to ponder.

nmewn's picture

The same way a tax cut to the people can be phrased as how is the government going to pay for this.

moneymutt's picture

if they went to $4 trillion and spend it all on public works and subisdizes states, it might actual swamp the deflation in debt/credit, but instead they will give it to banks for 0 percent interet so they can buy Treasuries and collect our tax dollars in form of interest

tom's picture

Inflation and the government's and financial system's extremely poor positioning for it.

Of the $1.2 trillion of monetary base expansion during "QE1" (Sept. 08 - April 10), banks and other financials used about $1.1 trillion to build up their cash, motivated in part by their ability to earn 25 bips on cash by holding it as excess reserves at the Fed.

But if QE2 were another $1T, or $2T, how much more cash would financials want, and how much more would they feel safe holding? The Fed can't legally force them to hold it. The Fed could try to keep them in cash by raising the rate it pays on excess reserves, but that would raise rates throughout the economy, including on Treasuries, and thus add new incentive for financials to get out of their cash. We don't know where it is until we get there, but there definitely is a point at which the excess reserves cup is full, and any more monetary base expansion spills out into inflation.

Inflation would raise rates on private debt, crushing financials because of the long durations of their bond portfolios.

If Fed kept Treasuries rates down by continuing to monetize in the face of inflation, that would send real rates on Treasuries into negative territory and induce holders to sell.

But my guess is Obama, Congress or both will call it a game and default before it gets that far. The fact that endless monetization is possible doesn't make it preferable, even to elites.


bobert's picture

What's going to keep the fed from increasing it's portfolio to $3T, then $4T etc., into infinity?

What will cause them to want to sell. Ostensibly (altruistically) to keep inflation in check? Will they be selling their portfolio at a loss at this point? How do you have a loss on something that cost you nothing?


Almost Solvent's picture

China does the same thing.
They can keep this going for awhile

bobert's picture

I stuttered.....

hedgeless_horseman's picture

Four months after the 110 billion- euro ($140 billion) bailout for Greece, the nation still hasn’t disclosed the full details of secret financial transactions it used to conceal debt.

Opacity, bitches!!!!!!!!!!  Black IS the new black.

web bot's picture

Just a couple of years ago, looking at several hundred billion in an annual deficit was not considered great... Today we talk trillions... and it is as if, so what... there's more where that came from (for now, that is)

zeta's picture

Have anyone noticed that there is no single female contributor other than Maria of ZH? Why is that?

citationneeded's picture

Maybe it's the sexist comments, the graphic images, the constant mentions of slut and bitch.

Or, women iconoclasts are hard to find.

citationneeded's picture

Hey! I could be a 'she'! :)

fuu's picture

Because Tyler is a shared byline?

Deflationburger with Fleas's picture

um....because none have signed up for accounts and posted?  This site is an equal opportunity bear cave.  Most women I know have much, much thicker skin than to be offended by the RoboTraders of the world, or whomever others were referring too.  Its almost more insulting to women to intimate that.

SheHunter's picture

Maybe because of the asinine (-) math questions?  We have less patience for red-tape BS.  I do voraciously read....but seldom post.

aheady's picture


Bitches bitchez? I'm also a she.