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Goldman Pitching Short EURCHF Trade; Time To Go Long
One of the worst top tickers in the history of Wall Street, Goldman's FX team, has come out with a tactical short EURCHF call. Like every other time Goldman says to do something, the prudent thing to do is the opposite. Of course, this means more weakness for gold, as the Swiss Franc is simply the safest equivalent of gold in the monetary realm. Oh well - if better cost bases are to be had, than so be it. Of course, if Goldman is right, this means that today's short-term reversion in gold is just that, and nothing more. On the other hand, we wonder how Goldman reconciles this call with its bet from two weeks ago that the euro is going to $1.55 from the firm's previous target of $1.38, which incidentally was our indicator that the EUR has top ticked.
Note details:
Since the beginning of the Summer we have highlighted the risk for intensifying political tensions in France, linked to the implementation of much needed fiscal and pension reforms. Over the last couple of weeks, the intensity and frequency of French strikes has clearly increased with nationwide fuel supplies threatened and students increasingly getting involved in protests. Further escalation of the situation could provide a trigger for the reduction of speculative long positioning in the EUR, which appears stretched according to our GS Sentiment Index.
We have also been highlighting for some time that the CHF appears to remain under trend appreciation pressure from the unwinding of legacy carry trades, also reflected in our 3 month forecasts of 1.30. One indicator we watch in that respect is the long end of the implied EUR/CHF volatility curve, which continues to mark new highs.
Overall, it appears the balance of risks has shifted towards a down move in EUR/CHF and we recommend going tactically short with a one-day stop on a close above 1.36 for an initial target of 1.28, currently at about 1.3425.
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Never trust those guys.
No accident that stock is on fire.
They screw their clients regularly.
$1275 (my wild ass guess)
then off we go....
A POMO day tomorrow. Gold will likely reverse course and rise in tandem with stocks.
British austerity, bitchez...
"Danny Alexander unintentionally revealed that the coalition expects 500,000 public sector jobs to be lost as a result of the drastic spending cuts when he was photographed holding a private document."
http://www.telegraph.co.uk/news/newstopics/politics/liberaldemocrats/8073943/Danny-Alexander-reveals-500000-job-cuts-in-document-gaffe.html
Has anyone ever kept track for Goldman's FX teams recommendations for the past year, and tracked what the contrarian P&L would be?
A good reply, FirstDivision, in my humble opinion. I'm more interested in what they do than what they say : what they say they do, say they did do or say they are going to do. Talk is cheap and more often deceptive, and in this unlevel playing field more often than not.
I said this about the EURCHF on Sunday. Goldie is aping me.....
The EURCHF is hiding in the woods. At 1.3400 it looks like a better short than a long.
Yeah, i was bowled over with your conviction for that one Bruce.
Conviction? What do you have conviction about? I think it is pretty much a crap shoot in here. But if you follow me you will not have dumb trades.
Tounge in cheek Bruce, keep your knickers on... and ohhh, i will always find time for a dumb trade.
A bit late for calling a short no?
Today marks an important turing point for global markets and the USD strength I warned about has arrived.
http://stockmarket618.wordpress.com
S**t, I'm short EUR/CHF in a huge way. Dammit.
how you FX guys even manage to sit down is beyond me...
GOLD has made an important top in my view.
http://stockmarket618.wordpress.com
Please help a FX beginner. So if EUR/CHF goes up means the CHF will be appreciating in value quicker than the EUR is decreasing?
I think you're looking at it wrong. This is simply the value of the EUR vs the value of the CHF. It's a currency pair trade. So in this case, if the EUR/CHF goes up, than the EUR would be trading higher and therefore it would be worth more than the CHF.
Thanks Cartman. It makes sense now.
You're welcome. Check out babypips.com
I know it sounds a little weird but it's the best educational site for people interested in learning about the forex market.
Well the CHF is more stable and with the EUR and USD both the opposite I actually think this trade is reasonable. But than again, why would they suggest it?
They're probably just want to throw us off with an accurate call every now and again.
They might have some kind of heads-up on whats likely about to happen regards the swiss exposure to eastern europe.
I looked at the volume (have no idea how they measure it) but EUR/CHF was somewhere around 250,000-400,000 at any given time on any given day. Whereas most currency pairs are in the millions, tens of millions and in the EUR/USD case, 100's of millions.
Maybe they're so desperate they went to the weakest market possible and tried to gain control. Kinda like JPM with their silver manipulation. Just a theory...
Goldman's FX team is implying that this equity and commodity rally has seen its best days.
I am trading EUR/CHF since 2 years on a continuous basis and I think Goldman is only stating the obvious: If this QE2 speculation and POMO driven liquidity rally is correcting, then CHF will benefit from a new flight to safety and EUR/CHF will resume its mid to long term downward trend (which has started with the Lehman collapse). We saw this happen today very clearly.
Should the QE2 rally resume, however, then EUR/CHF will go up again. But it will have a long way to go until a trend reversal occurs. At least a breakout above 1.40 would be necessary. Then again, any rally based only on QE2 would be coupled with inflation fears and therefore cap any upward potentiol of EUR/CHF quite narrowly.
The only thing which muddles the picture is the Swiss Central Bank. Officially, it does not intervene anymore to hold the EUR/CHF up (above 1.30). But, as a close observer of the daily price action, I know: It does. And sometimes in very, very big quantities. So generous stops are warranted if you short EUR/CHF.
I agree that the USD index will rally for some time and as a consequence, the rally in equities and commodities will fall apart.
However, how do you know that this is not just a short term correction in a secular USD index downward trend?
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Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic.
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