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Goldman's Explanation Of The EURUSD Plunge: "Ooooops!"
Once again Goldman confirms that its sellside analysts either bat 1.000 or 0.000. While Themistoklis Fiotakis' view, which we published yesterday, warned very prudently that the EUR surge is coming to an end, just as the European currency was about to take a 600+ pip tumble in under 48 hours, the other FX expert at bat (and that would be of the 0.000), Thomas Stolper, continues to be as steadfast as old faithful in his betting average. After we were almost resigned to be shocked by Stolper actually gettng an FX call right for once, when the EURUSD got to within 50 pips of 1.50 earlier this week and pass the Goldman profit target of $1.50 on the EURUSD, instead the trade is now in danger of collapsing on itself and being closed out at a loss. Goldman's explanation? "Ooops."
From Goldman Sachs: FX Views : Oooops!
1. Risk Correlations: In recent days we had become more preoccupied with potential risks to our tactical trading recommendations. We published a daily on the persistent Dollar correlations with risk assets and on the skew in Dollar risk reversals. Then Themos Fiotakis did a fairly detailed attribution exercise of how far EUR/$ could drop in case of adverse moves in other asset classes. The remarkable drop in commodities over the last couple of days, in particular the drop on Thursday, combined with a sizable move in European rates, was pretty close to the worst-case scenarios discussed internally. European sovereign rumours made it the perfect storm. We have now given back more than half of the potential gains on the long EUR/$ and long EUR/TRY ideas. With some Dollar strength across Asia, our short $/PHP and $/MYR recommendations also have given back part of their earlier gains.
2. How much more EUR/$ Downside Using various forms of attribution analysis in the form of our FX Betas or our Correlation Cruncher, the initial sharp move in EUR/$ looks about fair compared to the moves in other assets. Relative to some of these benchmarks, EUR/$ had possibly overshot by about 1 big figure before the correction. Thursday’s move in European rates added about 1 big figure to the downside and the drop in oil prices was good for another big figure. That brings us from about 1.4850 to about 1.4550. With renewed European sovereign concerns, another 2 big figures are now gone. The risk is that equities sell off in addition to this. Noah Weisberger discussed a temporary move to SPX 1275 in this week’s Tradewinds if the index repriced towards its normal relationship with cyclicals. This would knock another 2 big figures off the EUR/$, but there is a possibility that this that would be partly offset by a simultaneous rally in US rates. Still, one can imagine a scenario where EUR/$ corrects further towards the low 1.40s.
3. Underlying fundamentals remain Dollar bearish: Despite this correction, however, our underlying views have not changed. We continue to expect the monetary policy differential to widen in favour of the Eurozone. Our view that the ECB will hike in July has not changed. We continue to believe the Fed will remain on hold through 2012, with risks to growth and inflation broadly offsetting each other. Global growth may slow a bit but the underlying story remains supportive for equities, where we continue to expect substantial additional upside over the next 12 months (SPX target of 1525). And most importantly after the sharp drop in oil prices, we remain structurally bullish on key commodities, and this despite the fact that Jeff Currie and team had correctly signalled speculative length as an important short-term downside risk. Most importantly, we think the Dollar continues to be on a downward trend, linked to the continued weak balance of payment situation and increasingly the growing fiscal concerns in the US.
4. Our tactical stance after the sharp moves: On the basis of all these factors, we conclude that the Dollar move is only a temporary correction – painful but quite normal in a strong fundamentally driven trend. Moreover, we have made clear from the outset that our current tactical trades have a bit more of a fundamental flavour than normal. For example, the 1.35 stop and 1.50 target on our EUR/$ trade were both quite far from our 1.4085 entry level. Similarly, in our NJA trades we also remain very far from the stops.
5. Asian inflation remains a problem: Despite all the focus on the commodity and Dollar moves, the sell-off in many NJA crosses is unlikely to be in the interest of regional policymakers. Slightly overlooked, the central bank in Malaysia surprised the consensus (but not our Mark Tan) and hiked rates on Thursday morning. The Philippines central banks also hiked rates this week as inflation numbers have come in higher than expected. In this context, sudden local currency weakness is unlikely to help regional policymakers control inflation pressures. And after months of strong intervention to prevent currencies from appreciating, it would only be logical to now act on the other side. In addition, the upcoming US-China talks next week suggest the CNY is unlikely to notably weaken versus the USD.
6. $/Yen below 80 again: Though it was only a short blip, $/JPY briefly dropped below 80 again this week, consistent with a rally in US fixed income. Recent expectations of a slightly more hawkish tone from the Fed had been disappointed. And with falling commodity prices, as well as rising risk aversion, the downside pressure on US interest rates continues to boost the JPY. The Yen is gradually getting closer to the G7 intervention zone again. Overall, we continue to stick to our post-earthquake view that $/JPY will remain in a large and very choppy range.
7. Continued Unwinding Pressure in the CHF: Another dynamic that does not seem to change is EUR/CHF. Every couple of weeks, EUR/CHF moves above 1.30, only to drop sharply below this key level on the next bout of risk aversion. Long-dated implied volatility remains very high, likely still reflecting continued unwinding pressures from legacy carry trades and structured products funded out of the CHF. We described the dynamic in several Global Market Dailies in the past and continue to think it is too early to fade CHF strength.
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I'm sure the prop desk traded both sides up and down against their clients' money and, as usual, made a (legal) killing.
+1
Our legal/regulatory system is one of the biggest aiders and abettors in the crime of financial murder.
what legal system? Even a guy like OJ Simpson can buy his get outta jail free card at least once.
Bloomberg reports: News Flash:
J.P.Morgan and Back of America both made money every single day of this quarter on prop desk.
Every Single Day? How can that be? Is the market rigged? Yup. Confirmed. If you lost money, you now know where it went.
This kind of trading record has been commonplace at JP, Goldman and the rest. Whole quarters without one losing trading day ...it would lead one to wonder if the game is fixed? (I mean, we all know it is, but its funny to see it pop up on Bloomberg quarter after quarter in big bold lettering!)
Hard to believe their expert network failed them.
Die Euro Die! Which of course in german means, The Euro the! It makes sense
the movie title 'Die Harder' had no German translation for obscure reasons. I do not want to know how many fellow citizens looked in their DUDENs what kind of person or animal a 'Harder' could be.
That animal that eats through cables, only harder ?
Seriously, just declare Greece a "bad country", keeps all Eurozone debt and the Euro, everyone else gets the D-Mark 2.
it was just the SPIEGEL headline that too much fiat has been pumped there to be able to make a cut. Deutsche Bank etc would be bankrupt = Deutsche Bankrott = too late for separation. But I do not believe ANYTHING, I am quite sure that we read this kind of news because sb makes some great trades on it. I am so tired of it all. But also addicted. PS - right, I also thougt the movie sequel is about a group of 'Marder' eating through cables and causing mega car-crashes.
...Or did Germany *need* the Euro to drop, and all of this is going exactly to plan?
Currencies go up and down according to what the central banks want, and so does everything else. We've had three years of this stuff. It's way past the time to discuss fundamentals with a straight face when the Fed and its cronies have demonstrated their complete control of all markets.
After one of the biggest commodity squeezes in history, can the central banks resist one of the biggest short squeezes in currency? I don't think so. The big banks need the money.
to add salt to wounds - Goldman will report 100% profit on trading..
+100
Lol, no shit.
yep...
and I looked up 'Ooooops' in the Bankspeak Dictionary (ver. 1984) and it translated to 'got ya suckers'
WILL RISK APPETITE RETURN ? NEXT WEEK
I love the way the U.S facist administration cares more about the DOW and S&P than the quality of life of it's citizens. Ploughing billions and billions in daily to make sure it weathers all storms thrown at it, while the citizen's live on food stamps.
The people are worthless than an gauge in a transfer of wealth system.
And still they sit idle while they are financially raped.
Hey Funky,
The DOW is the quality of life measure in the USSA...
I'll be damned if I will sit idly by while Funky bad mouths US bankers and politicians as rapacious thieves and liars. Those are OUR rapacious thieves and liars! :-)
Actually your filth bankers are owned by European wealthy families, look at the owners of the FED... and the 'most persecuted race in history' the Jews have got a lot to do with it also ;-)
ah but is it really as simple it seems. is a Khazar "Jewish"?, what about Khazars who don't practice any religion? is it a race? isn't the real problem zionism, which has little to with race, and certainly not the race that was known as hebrews in the old testment. pretty sure we call them Palestinians now... and oddly the zionists are out to eliminate them. go figure.
It's fairly simple. There's no way all the jews are bad. There's no way all the bad people are jews. There's a population function to it. People in new york and california are more sociopathic than in kansas or iowa. You get contact sociopathy in large populations. It's about the only way some people survive. These large populations develope a sociopathy gateway expression. California expresses it in entertainment industry. New York expresses it in financial investment industry as well as entertainment industry. They are not self supporting so they reach out across entire countries and worlds and draw in what they need.
Just as cities reached into small farms to draw in what they needed. Replacing them with big industrialized farms. It's simply a bread and circuses model. Dancing and singing for your supper.
I have to ask...
It seems that everytime a margin hike is coming... a meeting is coming... big players make moves which coincidently happen prior to these meetings and they always seem to be on the winning side.
You know those guys that wear the tinhats may be on to something.
(just shaking my head)
Someone really ought to put together a comprehensive scorecard of financial analysts and establish a trading system based on the accuracy (or inaccuracy) of their calls, weighted by precision and consistency. An analyst who is wrong 80% of the time is potentially more valuable than someone who is right 70%. How much money has been made taking the opposite side of that boob Cramer's calls?
Clearly it is America week!
Damn you all, get out and wave those flags! Support those financial troops in the trenches!
The only answer to the Euro problem is to create a Club Med Euro. PIGS countries will take a haircut on their debt and a new currency will be created. I give this a 1 year horizon and a probabilty of > 55%, at the moment.
Ireland will be spared because of their golf courses and Guinness. Plus the Germans love buying 2nd homes on the harsh and rocky, windswept coast of Connemara. They get a warm feeling there as it reminds them of their mothers.
And...there will be another currency for the Squid to manipulate.
SilverDoctors has the inside dialogue on the negotiations between JP Morgue and the SEC over JPM's CDO settlement!
http://silverdoctors.blogspot.com/2011/05/jpmorgue-in-advanced-negotiati...
shit! i thought the euro looked toppish @ easter! damned timing! where are all the sell PM winners who sold the euro @ 149+ and bought the USD @ 72-73?
with one exception, a zeroH who said the dollar tends to be a buy rather than a sell at its lower channel line, almost everyone figured we were plummeting thru 72 to 70 (ain't it awful!) and the fact that this index is @ 74.8, right now, even tho the euro news came out, cryptically, a week ago, after the wedding, won't even give them pause, i'll wager. blame the PPT and get on with it! fact is, the bonds have been ^ for 2 weeks, and the yen has been ^. tyler posted the yen going apeshit against everyone in a cage match 24 hrs ago. fiat dreams and fantasies. let "the markets" decide!
still, just noise, really. remember 119 on the euro? in the 140's, heading south. maybe germany will stfu for a few daze. who knows? if germany wants gold---well, much of it is NFS, especially when then bankster victims are eating pure shit and getting squeezed to death---after bailing out the banksters!
The sheer fact of the matter is that anyone with a healthy, contrarian mind could see that this move was utter bullsh*t for the last couple months. But that's what happens time and again. If you got burned on the long side then you're an imbecile.
if rely on technical analysis without knowing the dominant cycle you are doomed..
This was posted middle of april 2011
http://www.readtheticker.com/Pages/Blog1.aspx?65tf=188_euro-approaching-another-cycle-top-2011-04
I posted a few days ago saying that the EURO was likely near the top. Sentiment and poistions in the market were all I needed to know. Happens every time and I do mean every time. It is the same in the indexes. The minute the herd starts piling in the market tanks. You can't really make this stuff up and in truth there is not many indicators (if youare a trader like me) that will allow you to time most moves well in advance. The essence of true price action that has not fundamental traces to WHY it is happening yet happens over and over again. You will note that in most charts key violation of technical areas and obvious patterns (like the infamous "head and shoulders") cause price to do just the opposite. You'd almost think the herd was being led to the slaughter wouldn't you? Well the truth is "they are". If you believe an entity like Goldman or any other large firm that puts its views or recommends positions to the masses simply put, you shouldn't be trading. This "fed has your back" thing I would be careful with too. They may have the too big to fails assholes backs but not yours.
Goldman is just another tip giver.
Don't take tips! Listen to them, and try to figure out the bias of the tipster, but don't take tips.
Marcus Aurelius is 100% correct. If you are a trader you don't need opinions of other traders to act.
If you are a trader you are trying to out trade the other traders. The reason that chart patterns don't work is because too many people are using them to make decisions. They used to work great. Way back in the '70s and 80's. The the market wizards and the turtles and all of the chart gurus told everyone how well they worked, and the game changed.
Technical analysis of price and volume works. Still. But you have to factor in the psychology of the market more than before. I make my best trades when I can figure out what will cause the greatest number of people to be wrong. When traders are wrong and losing, they do dumb things. And I am not talking about the small traders. It is the large traders/funds that move the markets and make the big moves. Just because they are big doesn't mean they don't get in a bad position now and then. As recent events of the last several years have shown.
Money management is the key. Don't bet the ranch on any single idea. But add to winners, and don't tolerate losers. And expect to lose!!!
I love this game!
gh
The lower echelons of a tyrannical regime who are responsible for (most likely) imposing unjust rulings against the oppressed masses are now scrambling over one another in a last-ditch effort to avoid their date at the hands of the lynch mob.
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I heard the whole interview, and he said "if silver goes to triple digits this year that would make me think about selling. On the other hand, if the dollar is confetti while silver is $150, I'll keep my silver."
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I make my best trades when I can figure out what will cause the greatest number of people to be wrong. When traders are wrong and losing, they do dumb things. And I am not talking about the small traders. It is the large traders
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It was the fault of the Japanese for allowing such a reactor to be built in that location without additional safety measures being required. That's the real story here. That and the shitty enforcement of already lax safety standards.
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Doesn't take a whole lot of effort to press the one, zero and enter keys.
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The first thing in the morning ZH read makes me wonder?
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