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Goldman Update On Euro: Moving From Sell On Rallies To Buy On Dips
From Goldman's Jon Pierce, FX Trading
The euro sits in no mans land. No longer looking as though its about to disappear lower as seemed the case in early Asian trading yesterday , but also not back above last years low of 1.2457 which would suggest a return to some stability and the opportunity to reverse some of the years losses. The euro has come a long way on the year and is clearly much less (if at all) over valued. The last portion of the move was clearly sentiment and fear driven and its quite likely that the fear had become excessive; yesterdays Sunday Times headline speculating on an imminent move to parity perhaps testament to the extreme bearishness. We have squared up our shorts and will revert to opportunistic range trading and I'm starting to think the euro might be a buy on dips rather than a sell on rallies barring any fresh pitfalls.
First real sign of a turn would be a close above 1.2457 level, with next resistance at 1.2600. To the downside the euro really needs to hold above yesterday's london afternoon low of 1.2280 and any break of the years low at 1.2234 would negate any thoughts of a turn.
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You know how it goes, it only takes one weekend for everything to be okay again, right?
I would not trust any information that comes out of GS. In all likelihood it is misinformation. A bearish continuation pattern is likely to form. Shorts may get squezed a little here due to the record high short interest, but the Euro Zone is in trouble here and could be headed for a breakup and dissolution of the Euro. Sit tight today and tomorrow, Thursday / Friday could get interesting.
GS is a market manipulator and a trader. So, trust them at your peril.
Here's the plan: Ask your central bank friends to crush the dollar overnight. Buy the Euro and risk assets. Then wait 2 weeks and play the down cycle again with a strong dollar.
Yesterday and today you see the same action in the asia/europe markets. Asia opens trading, Euro, Stocks, Commodities w/out gold all take a PLUNGE. Europe opens trading 10 hours later, euro rocket rallies back up, everybody then goes long equities and commodities. What ridiculous stick saves! Is this CB interference or propping up of EU FX markets? It clearly is not occurring in asia and US trading is sporadic but Europe FX trading is clearly long Euro. What's going on?
This is central bank shock and awe.
"Shock" that they are wasting their committed backstop on Japanese housewifes and "awe" as in awe-full result if they have to keep doing this to get back to net zero.
Technically, this is good for the guy with the following cables: long USD and short EUR or long JPY and short EUR.
Quiets down the MACD and builds the momentum case for the next big plunge toward dollar parity.
Britain, you're next.
You would think they have plenty of it after their buy at 1.35 call.
Always doing the opposite of the Squid is just as dangerous. The Squid should be ignored completely. You must decide for yourself if the waters are safe.
Agreed. Ignore Goldman's pronouncements altogether. They have shafted enough clients already, so do not fall prey to their mis-information campaigns.
Look at GS today. Ever so steadily approaching its 52 week low.
From a technical standpoint we easily could see that move back up to 1.26 as it is overextended, though I don't think this is any type of environment to range trade.
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