Meet The Latest Member Of The Plunge Protection Team: The European Central Bank

Tyler Durden's picture

The long-debated topic of whether the ECB intervenes on behalf of the euro can now be put to rest. 120 pip move in a minute is not a short cover. It is, and always has been, forced central bank intervention. Bernanke is so happy Trichet is doing his work for him for the time being. Be very wary of buying stocks on this intervention, as Central Bank involvement now at best leads to a 12 hour temporary "fix" to the market that Bernanke et al want to sustain.

 

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ZeroPower's picture

Ya saw the 1min candle on EURJPY go 70pips and i was like 0.o 0.o 0.o 0.o

Sudden Debt's picture

One can only wonder what tomorrow will bring...

Option experitation day on a crash moment

Germany going to trash up the euro this weekend

the rest of europe doing the same

US banks are shorting the $ on a massive scale so that's going to cost them dear. Maybe a second financial baillout needed because they shorted the US... wouldn't that be nice...

...

I think some people are planning to sell, and the PPT won't be able to buy it all. Unless they want to own 75% of all stock in the US and the EU

Tarheel's picture

what makes u think Germany is going to trash the Euro this weekend? Merkel has made the consesions needed to get the vote in favor of their part of the bailout.

Duesco's picture

Oh, that's a relief, I couldn't possibly figure out who just suddenly wanted to buy like SIXTY-TWO TRILLION EUROS in sixty seconds.

nonclaim's picture

It's already fading, how much was burned for a 20min relief? Or, what was scheduled to trade in that period that required such action?

Don Smith's picture

It's the SNB, not the ECB.  And I'm short at 1.2475

ZeroPower's picture

Sure theyre propping up the CHF but dont think the ECB doesnt have its feet in the mud either

monmick's picture

propping up the CHF

???

Paladin en passant's picture

CHF = Swiss Frank

CH = Confederation Helvetica (Latin for Switzerland)

monmick's picture

I know that; but they (SNB) are certainly not propping it (CHF) up! Trashing it, perhaps, but not propping it up...

Paladin en passant's picture

Sorry.  And you're correct, their selling it lower, not propping it up, by purchasing euros.

monmick's picture

Euro Erases Loss Versus Dollar on ECB Speculation (Correct)


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By Ben Levisohn and Mary Childs

(Corrects direction of franc in lede.)

May 20 (Bloomberg) -- The euro gained against the dollar, erasing an earlier loss, as speculation the Swiss National Bank sought to weaken the franc drove traders to theorize that the European Central Bank may do the same for the shared currency.

The euro earlier traded near a four-year low against the greenback and slid to the lowest level since November 2001 against the yen as the euro region’s sovereign debt crisis spurred investors to seek refuge in the Japanese currency. The yen rose against all its most-traded counterparts as the Standard & Poor’s 500 Index extended its plunge from last month’s high by as much as 12 percent and crude oil fell to its lowest level since July.

“There have been rumors of intervention by central banks,” said David Rolley, who helps oversee $106 billion as co-head of global fixed-income in Boston for Loomis Sayles & Co. “Most of the movement you’ve seen has been weaker commodities, weaker emerging market currencies and weaker commodity currencies, all correlated with the belief that the recovery may not be as strong as previously expected.”

The euro rose 1.2 percent to $1.2565 after earlier falling as much as 1 percent to $1.2297. It touched $1.2144 yesterday, the lowest level since April 17, 2006. The shared currency dropped as much as 3.8 percent to 109.51 yen, the lowest level since November 2001, before trading at 113.20 yen at 3:02 p.m. in New York.

The Swiss franc weakened against the euro, falling 1.2 percent to 1.4449. It earlier strengthened as much as 1 percent. The SNB’s press office couldn’t immediately be reached for comment.

[...]

 

Last Updated: May 20, 2010 16:24 EDT

ZeroPower's picture

Agree with your previous responses, i meant propping the EUR, just was talking about the SNB so had francs on my mind:)

mephisto's picture

I'd think the SNB has just about enough Euros after yesterday. Why would they buy more and sell USD when that needs more ammo for the bigger market?

Agree with the trade tho. I dont think its intervention, its rumours only and we could go down as fast as we went up. Stops around 1.2510-25 I believe.

Sniper's picture

What a move - trip the stops below the fall 2008 lows then shoot up on ridiculous volume.

That there may be your bottom

Sudden Debt's picture

LET'S ALL TRY TO EXIST THE STOCKMARKET IN A ORDERLY FASHION!!

 

ME FIRST!!! BEEP BEEP ZOOOOOeeeeeeefffffffffffffffffffffffff.......

monmick's picture

Bernanke is so happy Trichet is doing his work for him for the time being.

Yeah, and with HIS dollars too!

 

lsbumblebee's picture

If they can just keep this intervention up for the next 50 years we should be able to ride this storm out.

sheeple's picture

check out the CADUSD trade...shiiiit

Gloomy's picture
The Great Depression II

Warning: the following note from the normally mild-mannered European Rates Strategy team at RBS is seriously bearish.

They think the yield on 10-year US Treasuries can trade at 2.0-2.5 per cent.

Eat your heart out, Bob Janjuah.

First the context, emphasis ours throughout:

We have always been believers, from one year before the crunch when we went bullish govt bonds (5yr US specificially at 5-5.25%), in Great Depression II. Patience has been required; it now has potential to speed toward its conclusion; a European $1trn package which does little & political panic tells you we are about to reach the end of the road, with lower safe haven yields. The world should be discussing deflation, not inflation. The world should be dicussing buying 30-yr govts, not continually wondering like a stuck record where the first rate hike will appear. The battelines are drawn, the govts on the other side have used up their ammunition (apart from QME next which is bond bullish/fx bearish). Game on, as my pal/colleague Andy Chaytor would like to say.

We have been suggesting in meetings that financing of deficits is in part a confidence issue. Rather like going into a bank with a big hall to give you confidence, since the bank knows if you all withdraw your money they dont have the cash in the vault (think ‘Its a Wonderful Life’ opening scene). If you, the investor, think that there will be others to continue to finance the ongoing deficit, you will be (more) willing to buy.

But this is now in jeopardy in some jurisdictions. Why? because the world of end investors who are expected to finance deficits with their central bank/insurance/pension/retail investor capital (ie this is not about speculators, this is about deficits) no longer have this confidence. ‘Yes i could buy these bonds now, but even with the very strict 5% budget deficit cut, you still need to borrow a NET 7% of GDP from someone else, as well as refinance all your redemptions, and I no longer have confidence you can do that because your debt/deficit is too high. And in the euro you cannot print your way out or devalue. If i think no-one else will buy, I certainly will not’. The end game.

The only way that Europe does not break up (have members leave) is by accelerating the deflation that was always potentially coming (or at least should be in active discussion) in our deleveraging theme. This deflation is eminently possible – this is not a note about EMU break-up. Rather, if austerity measures continue for some time – and Harvinder thinks that they could feasibly continue for 7 years in Greece because the metrics are so bad they will still need help after the package’s timeline – deflation has to be a risk.

And now the conclusion:

1) So the confidence notion for deficits is in jeopardy

2 ) deleveraging still has to take place, especially EMU

3 ) the level of lending by northern EMU to southern EMU makes this a full EMU bank contagion risk

4 ) risk assets can move far faster than everyone always thinks, once the wolfpack (as Swedish finance minister terms financial markets) smells blood

5 ) various asset metrics say this is possible soon (VIX popped from complacency at 16 to 34, highest in a 1 year, in two weeks, gold +16% in 1 month, 3mth LIBOR/OIS 12-months forward up to 35bp)

6 ) there is nothing anyone can do about this. This is key. All through the crunch we have said somone had to take the hit of debt deflation (hence why my investor presentation was called ‘debt deflation’ for 3 years). Governments chose to nationalise the problem and make the taxpayer liable, hence why govt austerity is necessary and also supports why govts underperform supracorps.

7 ) We are in the middle of what I call the ‘Harry Potter scar’ in meetings. 2007-2009 was the sharp down-wave, Q209-Q210 the rebound driven by massive fiscal + monetary shock and awe, and we have been waiting for government intervention to wane and realisation of appaling private sector demand to come through (the 3rd part of the scar, the next downwave or at best anaemic growth). See this chart from the Bank of England about the very poor levels of domestic demand across Europe, and imagine what the numbers will look like once you remove fiscal largesse. Eg, German domestic demand has risen a net 0% in the past 10 years.

8 ) market discussion could easily turn to next moves being rate cuts (which we have been discussing for some time from a FI strategy bull perspective). And QME.

9 ) as with the (possible) end of any regime, expect extremes. Even if EMU is not changing, disinflation/risks of deflation is coming quicker. Watch for politicians/bureaucrats making emergency announcements (eg Germany short selling ban last night is a symptom, irrelevant in itself, but a symptom this is reaching its end game).

10 ) So: why should LIBOR/OIS not trade at 100bp if banks are seen as riskier propositions? why should 3mth futures curves not be inverted? Why should govts not trade cheap to swaps (and certainly to bond-like supracorporates)? why should gold not trade at US$2000 eventually (notwithstanding the fact that our commodity experts favour platinum and palladium right now, see Nick Moore’s weekly here)? buy the tail risk.

http://ftalphaville.ft.com/blog/2010/05/20/238051/the-great-depression-ii/

Hondo's picture

Be wary of Central Banks committing taxpayers money to support financial markets that benefit their own.

ratava's picture

are you sure tyler? maybe the dollar confidence crisis finally arrived. i know i wont be holding no dollars after todays completely unmanipulated stock action.

docj's picture

It's like trying to patch a gash in the Hoover Dam (yeah, I chose that on purpose) with bubble gum.  It might work for a minute or two.  But man when it cuts loose...

depression's picture

Heroin addict Benny B. getting his daily fix....

http://www.youtube.com/watch?v=iJZYG5qwHHI

john_connor's picture

The desparation acts of a failed central bank model.  This is history before our very eyes.

ECB and FED will = EPIC FAIL.

Sudden Debt's picture

Looks like we'll have to fire up a second vulcano to draw the attention away...

Duffminster's picture

Could the EU and Fed Interventions be longer lasting if they used Synthetic Financial Instruments to Intervene so that they could get the same kind of Leverage that lets say the other Supplemental Liquidity Provider can get?   Or are all Central Bank  Interventions default "Synthetic?"

SWRichmond's picture

Synthetic Financial Instruments

You mean, like, swaps?

Hephasteus's picture

It get's really deeply abstracted and way off the track of supply and demand when you start treating currencies like there is a bunch of economic activity underlying their movement and swapping when it's nothing more than straight up future swaps that may or may not have economic activity following it.

IE the only way you have to defend your currency is basically through selling off everyone elses currency and buying up your own. So this is what we are seeing with the euro except that it's not player on player. You got 5 or how many other central banks buying up for one currency. In a sense it's like a blood transfusion. You're replacing thier euro blood with american dollar and yen and yuang and aus blood.

Duffminster's picture

Could the EU and Fed Interventions be longer lasting if they used Synthetic Financial Instruments to Intervene so that they could get the same kind of Leverage that lets say the other Supplemental Liquidity Provider can get?   Or are all Central Bank  Interventions default "Synthetic?"

doomandbloom's picture

they only way they can prop the Euro ...i think..is by devaluing the $...

 

reading's picture

Jeez they're so subtle...I mean don't make anyone nervous or anything when you jack up a currency like junkie shooting up heroin.

 

Samsonov's picture

Cramer says that, with so much bad news priced into the market, Europe better blow up in the next 48 hours or there will be a big relief rally.

monmick's picture

Is that the one on CNBC or the one on Seinfeld?

RichardENixon's picture

It's gotta be the one on CNBC. The one on Seinfeld is too smart to make such a ridiculous statement.

Cheeky Bastard's picture

Tell me you didnt just quote fucking Cramer on ZH, and did so with a serious look on your face.

FAIL !!!!!

Samsonov's picture

Jim Cramer is very funny, and now that he's freaking out a little, he's hilarious.  It actually didn't occur to me that anyone here would take it seriously.

akak's picture

Anything that causes Jim Cramer to freak out and feel pain is a good thing in my book.

SCHADENFEUDE, BITCHEZ!

FitBusinessman.com's picture

Haha!!! I'm sorry, but not even Cramer is going to change the reality this time around. Retail investors have already been shamed once.

 

carbonmutant's picture

BERLIN, May 20 (Reuters) - The leaders of Germany and France have decided to coordinate their countries' euro support efforts and work together in upcoming summits, Chancellor Angela Merkel's spokesman said in a statement on Thursday. 'They have agreed that Germany and France will coordinate closely with each other at the meeting beginning on May 21 in Brussels,' government spokesman Ulrich Wilhelm said, adding that the decision came after Merkel spoke with French President Nicolas Sarkozy on Thursday. http://www.xe.com/news/2010-05-20%2013:16:00.0/1160325.htm?c=1&t=

Mr Lennon Hendrix's picture

From, THE DOELARR: A LEGACY UNMATCHED

First, the doelarr "strength" to continue tightening the trading range of Euro/USD.  The move to $1.30 will happen quick, in the next week or two.  DXY to trade roughly at 81.5.  Gold and silver will continue to make nominal highs against the Euro, as well as push back up to the nominal highs for the doelarr.  Then there will be a move down to $1.25 Euro USD with the DXY staying in the 81.5 range.  By late May, the pressure from the doelarr will have peaked, as the State budgets of Amererica will once again be addressed. California, will legalizing pot combine with personal investment by Walled Street in Hollywood save your ship?

4.21.10

http://www.zerohedge.com/article/open-thread-reader-not-making-any-payme...

asdf's picture

the ECB doesn't prop up its still overvalued currency, especially not when half of europe is in a severe balance sheet recession. Maybe it's the PBoC

AR15AU's picture

Platinum is precious only to GM executives trying to placate the EPA.  

toros's picture

Bring out the wonder puddy.

zhandax's picture

Looks like they took out the stops.  Euro almost printed 1.26.

Budd Fox's picture

They surely took out MY stops. I sold at .132 pyramiding on 1.29....I left a trailing stop at 1.26 ystrday night. Woke up and saw my stops wiped away.....whoa, this boys wants us to believe they have "cojones". Ok next

Will find a good selling level again.

homersimpson's picture

Jim Cramer says the Euro spiking was due to shorts and says I'm an eediot for shorting puts. Call me an eediot.

Grand Supercycle's picture

 

For several days I have been warning of EURUSD buying support as detected by my indicators, and this has been confirmed by the recent break out.

The proprietary indicators I use can identify trend changes before they occur.

http://stockmarket618.wordpress.com

http://www.zerohedge.com/forum/latest-market-outlook-1