Goldman Slams USD... Again

Tyler Durden's picture

It has been a few weeks since Goldman's FX strategist Tom Stolper made a public appearance. Which is reasonable: after all the EURUSD dipped as low as 1.39 about ten days ago, a level which threatened to stop out Stolper's 1.55 EURUSD target at a loss. Luckily for the GS FX strategist, this is about the time when the G7 decided it was its imperative to once again impair Europe in exchange for sending US stocks higher (i.e., DXY down, RUT up), alas the decision came at a very bad time for the US economy, which was just entering the worst 10 day period of declining growth since last summer. Either way, now that the EURUSD has retraced a massive 630 pips move in the past 10 days, Stolper has once again shown his head, issuing yet another hit piece on the USD. And what a hit piece it is: "...he upcoming balance of payment data will likely show a notable
deterioration in the BBoP. Finally, US policymakers seem to be making
little or no progress on fiscal consolidation with Moody’s now also
warning about the consequences of hitting the debt ceiling in early
August
. We remain short the USD against the EUR, CNY, MYR, PHP, and now also the NOK." Ok, we get how you feel... But what is the prop desk doing?

Just out Goldman Sachs:

Dollar Drifting Down. It’s been a few choppy weeks for Dollar bears, but our conviction in the underlying trend remains unchanged. A host of reasons led to a temporary recovery in the Dollar and we would have liked to be nimble enough to avoid the roller coaster. At one stage we had briefly given back all previous gains on our long EUR/$ recommendation. But things look much better for Dollar bears again. Our EUR/$ long is now in the black by about 3.7% and we used the recent Dollar bounce to initiate a short USD/NOK Top Trade for 2011. We also revised our forecasts in the latest FX Monthly to show a continued USD down trend, now projecting EUR/$ to trade at 1.55 in 12 months time. The reasons for the Dollar decline remain the same. Structural imbalances and weakness in the US manufacturing sector result in easier monetary policy in the US than elsewhere. Moreover, the same structural problems keep the trade deficit wide and reduce the attractiveness of investments in the US as highlighted by weakness in capital inflows. The upcoming balance of payment data will likely show a notable deterioration in the BBoP. Finally, US policymakers seem to be making little or no progress on fiscal consolidation with Moody’s now also warning about the consequences of hitting the debt ceiling in early August. We remain short the USD against the EUR, CNY, MYR, PHP, and now also the NOK.