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Kicking A Dying Dog: Goldman's EUR Update
From Jon Pierce of Foreign Exchange Trading, Goldman Sachs
By way of a quick update :
I have received a lot of questions as to what is driving this morning's sell off which has seen a low print of 1.2562.
I have not seen any fresh news that explains the sell off, I think its more a case of some recently encouraged bulls throwing in the towel on the basis of the appalling price action. Yesterday the euro was unable to sustain a rally even in a risk on enviroment. We saw some longs cut on the beak of 1.2600. The risk still lies to the downside, with next support at the years low of 1.2510 and then last years 1.2457 low. Rallies should find selling interest initially at 1.2650 and then 1.2700 and if one wants to roll down a stop to protect a short it should now be placed at 1.2750.
______________________________________________
From: Pierce, Jon [Sec Div]
Sent: Wednesday, May 12, 2010 3:41 PM
To: Pierce, Jon [Sec Div]
Subject: Eur update
The Euro trades like a sick dog; albeit one that has a lingering illness rather than one that has just been hit by a truck . The package announcement squeezed many of the shorts out of the market and briefly saw us trade to 1.3095 but whilst peripheral spread markets have benefited considerably the currency is back at pre package levels. The reason for the sell off is debatable ; some suggest it reflects a belief that the european risk has just been transferred from the periphery to the core while others opine it is the currency unhealthy mix of tight fiscal policy and implied loose monetary policy. The options market seems to be factoring in less of a bias to the downside and anticipating a slow grinding move lower with less risk of an aggressive collapse; which seems reasonable .I find my conviction considerably lower post package but based on the price action , reduced positioning and policy mix I still feel a bit more comfortable playing from the short side . We are trying to trade opportunistically around a short position and would look to add again on rallies to 1.2740/50 . A move back above 1.2850 would warn that perhaps the market has underestimated the change in landscape and would make me think again . To the downside first support is at the asian low of 1.2605 followed by the years low of 1.2510 and then the 2009 and autumn 2008 lows of 1.2457 and 1.2339 respectively.
Good luck
__________________________________________
Goldman Sachs International.
Peterborough Court | 133 Fleet Street
London | EC4A 2BB
Tel: + 44 (20) 7774-1640
Email: jon.pierce@gs.com
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The currentsea war is heating up.
This is going to be terrible if the euro keeps dropping this summer!
I was planning a vacation to California this summer, but if this keeps up, my vacation is going to cost me like 30% more!
Just go to Greece. It's like the California of Europe.
haha. on the other hand, my vacation to Portugal is now going to cost 25% less! YAY!
If things keep up like they are in CA, ANY form of money will have you partying like Marines on leave in Tiajuana.
The EUR is cratering hard, and we will see much more to come IMO, I have been saying the past two days 1.20 was going to be seen next week. Every intervention attempt to pump it back up is met with harsh drops immediately. US Market crash helping along the way.
China is trying to keep it above 1.25.
"
China has been a rumored buyer of EUR/USD on dips today and trend lows are down at 1.2510, not far from present levels. Expect the downside to be a slog with pretty solid efforts to keep EUR/USD from falling off the table near-term.
EUR/USD trades at 1.2547 and the S&P is down 1.1%."
http://www.forexlive.com/106463/all/stocks-losses-acclerating-late
I really like that site. Smart people there. I think once China's effort of supporting 1.2500 area fails the flood gates will open.
Surely the ECB/BIS will agressively buy to slow any gap down. China also has such a big interest in a strong EUR, they wont give up that quick.
It might not be visible yet, but there's surely a huge international EUR bid somewhere around the 1.243 lows.
Just a quick question-- on a daily basis what trades more notionally (which is a larger market) U.S. Equities, or FX (currencies).?
Spot FX, by multiples.
Its not even close - currencies trade about 3 to 4 Trillion a day. Dunno abou eequities - I suspect its in the 100s of billions.
Ok, - if you look at a tick for tick chart of SPX vs DXY you see almost a perfect inverse relationship and shape (adjusting for scales)... so is the dollar leading the stocks or vice versa? (this is a heated debate by the way over here!) -- I say it's the dollar leading equities, 2 people think the reverse.
Currencies lead. Why? Because on my IQ scale:
Currencies: Smart human
Bonds: Smart dog
Equities: earthworm ( no anticipation simply reacts to heat and cold - tends to move towards food sources. Often gets smooshed underfoot)
maybe so- but that doesn't make it true. The earthworms at GS, JPM,etc are doing very well.
The TBTFs prop trading does involve a certain amount of equity trading. I was referring to the nature of the overall equity market and its overall perception of reality as being equivalent to an earthworm. JPM/GS etc know how to get the eartworm to do tricks for them - profitable tricks. harder to do with the huge currency market - which they have to respect.
If you have any doubts just spend 10 minutes talking to a pension/mutual fund manager . Then spend 10 minutes talking to a currency trader.
Hasn't been this hot since the years before WWII.
Europenas probably saying " Our currency - your problem" hahahah
yeah..cuz halloween came early this year and the ECB acem to the party as the Fed!
TD,
FYI.
http://blogs.wsj.com/economics/2010/05/13/bernanke-letter-to-lawmakers-on-swaps-spin-off/
I tell you what, they need to investigate the AP service while they are at it. These clowns had stories up earlier how the market was up slightly on good job report and lower mortgage rates, and now that the market is falling off the cliff again, they release a report saying stocks slide after disappointing jobs report. The AP is a complete joke these days. They have succombed to CNBC style propaganda reporting and make believe.
Its like clockwork down Thu/Fri - up Mon - Tue. Wed up for grabs.
http://uk.reuters.com/article/idUKTRE64C4YE20100513
Explosion in Greece. That's not going to help the Euro. 1.2540 as i type, should be an interesting battle from here to 1.2500.
Bye bye 1165 (again), we hardly knew ye.
Floors become ceilings...
How dare the market deviate to the downside of VWAP on market close, ish dont think so.
So the lesson for me is - do not trade equities. Equities are only to be bought when they are very obviously cheap relative to average 10 year trailing earnings and dividends.( ie. Not now!!).
If you gotta trade - trade currencies . harder to manipulate and reflects macro event in more predictable fashion.
and:
Unless the underlying company of the equity you're trading produces a real currency, like a junior Au/Ag miner. And though the real money they produce has been very successfully manipulated since at least 1971, it is definitely getting more and more difficult to accomplish every day. Though all the 'paper PM' ETF's are doing their level best.
Regards
Do you have to use the phrase 'kicking a dying dog'? Why not stomping a dying cat, or shooting a dead horse?
Or chewing up a mailman? lol.
Bye bye 1165 (again), we hardly knew ye.
Floors become ceilings...
Speaking of Goldman, from the broad that gave you this:
http://www.usatoday.com/money/markets/2008-01-02-predictions-numbers_N.htm
1675 is the prediction from Abby Joseph Cohen, Goldman Sachs
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We now have this:
Economy to Slip But Stocks May Gain: Goldman's Cohen
Published: Thursday, 13 May 2010 | 2:42 PM ET
By: CNBC.com
The US stock market should continue to move ahead even as the economy slows down, Goldman Sachs strategist Abby Joseph Cohen told CNBC.
AJC proves that you can be the biggest idiot on the planet and still make a good living as long as you are willing to be a wall street shill. Even her disastrous forecasts prior to the tech bubble bursting were not enough to force her into another line of work.
Right when everyone thinks the Euro is a goner, rumors of its demise will be greatly exaggerated.
Goldman went from what? Bearish to bullish,back to bearish and now extra bearish? Hell I cant keep up with their calls, but I dont see how they could book a perfect quarter based on following these spastic outlooks.
The guys making these calls you speak of are on the equities and FX trading desks. They are traders, and good ones - some they lose, most they win.
The guys printing the $ are in the bond trading and, i think, the treasury. Between them they have learned that 4>0, and are locking that in like a good 3-6-3 banker of old. Now that should be renamed 0-4-8.
I have been saying the past two days 1.20 was going to be seen next week. Every intervention attempt dog training to pump it back up is met with harsh drops immediately.