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Goldman Refuses To Take Profits On Tactical EURUSD Trade, Extends Target From 1.37 To 1.40

Tyler Durden's picture





 

Thomas Stolper's Goldman FX team, who a little over a week ago put on a tactical target of 1.37 on the EURUSD, refuses to take profits on the EURUSD, and instead has extended the target from 1.37 to 1.40 (with a 1.33 stop). Since this is the first time we have seen the firm continue selling into the close, we wonder just how big the pain for the prop side of GS is if it must be hoping to cut its losses on a reversal. With the pair trading well north of 1.37 Goldman may be forced to keep pushing the target ever higher on Asia's ongoing rescue of Europe.

From Goldman Sachs' Thomas Stolper

Mixed macro data and mixed price action across cyclical assets was the flavour of the last 24 hours.

On the macro front good news on the substantially oversubscribed EFSF bond  and US consumer confidence contrasted with weaker-than-expected business sentiment in the Richmond Fed survey and, in particular, an unexpectedly weak UK GDP. Instead of growing +0.5% qoq, as consensus thought, the UK economy shrank by -0.5% in the final quarter of 2010. Typically the first take on UK GDP is subject to substantial revisions, but it appears weather related effects in the service and construction sector are to blame, as well as a snow-disrupted holiday shopping season. Fiscal tightening may have started to have an impact as well.

In two important speeches yesterday, Bank of England Governor Mervyn King signalled continued accommodation in monetary policy in light of weak growth and an expected fall in inflation. In his State of the Union address President Obama proposed a 5-year spending freeze, with little immediate impact on the debt trajectory. The proposal likely foreshadows as debate on spending caps later this year.

In terms of price action, the mixed data coincided with a continued notable drop in oil prices, while industrial metals remained under pressure as well. EM currencies were generally slightly weaker, whereas most major currencies drifted stronger against the Dollar. EUR/USD hit the 1.37 target in tactical long recommendation and we extent the target to 1.40 with a new stop on a one-day close below 1.33.

Appropriately the biggest moves could be observed in Sterling crosses as they reflected the weakness in UK activity data. Interestingly the sharp Sterling move coincided with a notable rally in the CHF frank, which suggests positioning related activity as we discuss below.

 


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Wed, 01/26/2011 - 08:22 | Link to Comment LongSoupLine
LongSoupLine's picture

GS doesn't even bother to pre-lube its clients now.

Wed, 01/26/2011 - 12:08 | Link to Comment spekulatn
spekulatn's picture

+1.

Wed, 01/26/2011 - 08:24 | Link to Comment johngaltfla
johngaltfla's picture

Man are they setting the pigs and PIIGS up for slaughter....

Wed, 01/26/2011 - 08:26 | Link to Comment cossack55
cossack55's picture

I love a pulled-pork sandwich.  Just can't afford it right now, what with the price of hogs.  Will they be roasting them Hawaiian style?

Wed, 01/26/2011 - 08:38 | Link to Comment HUGE_Gamma
HUGE_Gamma's picture

After Euro Crisis VI

Euro Crisis 3D: The Final Chapter

Wed, 01/26/2011 - 08:39 | Link to Comment nonclaim
nonclaim's picture

Setting a stop 300 pip below current price and risk all profit? GS FX desk must be desperate to fleece their clients this way...

Wed, 01/26/2011 - 08:48 | Link to Comment scratch_and_sniff
scratch_and_sniff's picture

Starting to feel a bit jittery up here, scaling back now and if we dont break 1.3770 by friday i am out until a decent retest of 1.34

Wed, 01/26/2011 - 09:09 | Link to Comment JW n FL
JW n FL's picture

panda bonds bitchez... i called it a while ago..

but just becuase you can see it, doesnt mean you should touch it.

when the weight shifts... shorts will be crushed, wash, rinse, repeat.

pump, give bad news, gets the shorts in place and then BOOM! stomp.

Wed, 01/26/2011 - 09:16 | Link to Comment Ferg .
Ferg .'s picture

I've had it up to here ( raises hand above head ) with Goldman and their flip flopping FX analysis . I suppose this time rather than risk tarnishing their reputation further they thought it best to issue both bearish and bullish calls . A zero sum result is better than a wrong one .

I've been very suspicious about this euphoric ejaculation throughout the euro crosses . With regard to EUR/USD specifically I've made a few observations :

 1. The initial surge from below 1.2900 was probably one giant stop run .

 2. From the 17th onwards ( above 1.3400 ) the move up was characterized by rallies during illiquid trading periods ( central bank buying during the Asian session , Friday afternoon / later session meltups )

 3. Investors have shrugged off their euro negative sentiment as a reult of a few hawkish comments from Trichet about inflation and an EFSF bond auction which was never in a million years going to be permitted to be anything other than a success .

 

Conclusion : This rally is suspect . It owes everything to stop run , low liquidity ramp ups and some good ol' myopic mentalities .

For those trading the pair there is some heavy resistance at current levels around 1.3750 ( solid horizontal ) and a 61.8 % Fib retracement from the Novemeber high to the January low at 1.3740 .

  

 

Wed, 01/26/2011 - 09:20 | Link to Comment Cdad
Cdad's picture

Ferg,

Agreed.  It is time to sell her. 

Additionally, it is nice to have confirmation on just who is responsible for these constant morning gap up moves for the last six months.  Hello L. Blankfein.

 

Wed, 01/26/2011 - 09:27 | Link to Comment Ferg .
Ferg .'s picture

Looking to sell her myself , preferably on a blast through 1.3750 up towards 1.3800 .

Those gap ups are slowly eroding my sanity .

Wed, 01/26/2011 - 10:11 | Link to Comment Cdad
Cdad's picture

Ferg,

Again...agree.  There should be an oh so obvious moment, a chart event, that should signal that the idiots have gone too far.

And also agreed...these engineered morning gap up zombieville crap moves...nuts!  But you cannot build a sustainable rally upon a foundation of sandcastles and hopium balloons.  It all bodes well for the skeptics.

Wed, 01/26/2011 - 09:58 | Link to Comment Orly
Orly's picture

As the Euro goes, specifically EURJPY, so goes the USDJPY.  I am short both right now but, if we get some sort of triple-decker flim-flam ramp job today, I think I'll go on vacation until they run out of money to stop messing up my beautiful charts.

The ten year note should tank after the housing report and take everything else with it.

Wed, 01/26/2011 - 10:32 | Link to Comment 4xaddict
4xaddict's picture

daily DiNapoli overbought level is 1.3830 region and has confluence with the 100% extension of the latest daily ABC bottom pattern.

These look like more logical targets that the 1.3750 region because everyone on the planet sees that 61.8 fib level and the 1.3750 support/resistance area.

Quick wash and rinse of all the weak shorts into the early 1.38's and then a tank if you ask me.

Wed, 01/26/2011 - 09:49 | Link to Comment Just_Another_User
Just_Another_User's picture

GS is so inconsistent it isnt even funny... the last 3 internal reports ZH has posted from GS all contradict one another...!

These guys dont know whether their coming or going... they hedge their own reports/projections.

Wed, 01/26/2011 - 10:00 | Link to Comment Pretorian
Pretorian's picture

Since 2002 they are one of the boys moving the FX market wherever they want with other ECN members. After default of some like Lehman ,Bear etc Goldman share in deciding got bigger.

 

Wed, 01/26/2011 - 10:25 | Link to Comment Ferg .
Ferg .'s picture

Cdad ,

Agree on both points . Blow off tops are one my favourite moves to sell into , and that's what I'm looking for here . Perhaps the FOMC will deliver as did back in August just before the euro tanked . Yeah a rally with fundamental sustainability is not something to buy into . Parabolic moves up lead to parabolic moves down !

Orly ,

You just gave me a nice jolt there , much obliged ! Sometimes slips my mind how important yields are for the USD/JPY . I'm actually long this pair for a while now ( from around 81.00 ) but I'm getting a bit nervous . If it heads below 81.00 , I'm out .

Wed, 01/26/2011 - 11:02 | Link to Comment Orly
Orly's picture

Have a look at the Daily on USDJPY.  The pair has definitely turned on the worm with the daily open yesterday below the BBMA (28,2).  The downside strength here is increasing while everyone fully expects the USD to ramp.

I don't see it that way.  I see that we are going into the same trading mode that we were in after Dr. Bernanke "swapped" a half-trillion for Pounds way back in the day.  USD down, JPY up, GBP sideways, AUD up, CHF up.  Risk-on, risk-off, with the USD seen as a "risky" currency.

USDJPY and USDCHF are headed for record lows, I think.  Today could be the catalyst.  Maybe tomorrow.  All I know is it is coming pretty soon.  Maybe the wheels come off after the housing report a mere ten minutes from now.

A close on the USDJPY below 81.43 should confirm the move.

________

Addo:

Wow.  I guess the people who weren't taking out mortgages ( http://www.zerohedge.com/article/mortgage-applications-tumble-double-digits-refinance-index-hits-lowest-january-2010 ) were buying brand new homes valued at $250,000.  Amazing how that works, eh?

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