EURUSD Jumps Driving Global Risk-On (For Now)

Tyler Durden's picture

As US equity futures open up 15pts or so (stalled at post April NFP and Greek Election open levels from May 6th), it seems EURUSD's initial 130pip spike from Friday's close merely jogged it back up to Friday's late day ramp close in equities (just above Thursday's highs for the major FX cross). Of course it was a see-saw weekend for Spain - they got all the money they wanted (and probably some ponies and unicorns) but only managed a tie against Italy in Euro 2012. Given the short-interest, as we noted in our widely read analysis of #Spailout yesterday (Item 5 here), it is little surprise that we are seeing EURUSD rally. EURUSD is still around 200 pips shy of its swap-spread-implied rate (which seems to be the common level to revert to after 'stress' liquidity hits the EUR and is then 'fixed'). We won't be surprised to see other risk assets levitate on this and while some traders will resist the urge to fade, we suspect that by the time Europe opens things will look a little different as Spanish sovereigns bondholders realize what just happened. The USD is weak against all the majors except JPY as risk-on carry trades hold it practically unch against the USD. Gold has opened modestly higher (in line with USD -0.8% weakness) but Silver is its high beta self +1.9%. Treasury futures are open (cash not yet) but imply a 10-12bps jump in yields for now (which is just normalizing them to ES from Friday's close). WTI just opened 2.3% higher at $86 (so much for that tax-break?) 

ES opened at the May 6th swing lows - reaction post Greek election and the awful April NFP print...

EURUSD and more importantly for risk, EURJPY, had pushed up to where ES closed on Friday - with maybe a 5-10pt premium for momentum, then as ES opened 15pts up EURJPY also popped - but neither seems ready to push higher or lead for now...


Each major 'event' has put downward pressure on EURUSD relative to its swap-spread-implied 'fair-value'. Think of this as a 'liquidity' premium. The lower pane shows the crisis in Q3 of last year which then reverted on global CB intervention and then the EUR's undervaluation through the entire LTRO1 and LTRO2 period (which reverted almost perfectly when LTRO 2 ended and the ECB stopped 'printing' for want of a better word). The most recent drop reflects #SPailout fears and the Greek election leaving us still 1 sigma below fair-value here - reflecting, we suspect, the fact that this doesn't change anything - both for those looking for market-based targets for their spec EUR longs, 1.2850 seems reasonable out of the gate, but we would be surprised to see it get there on anything but the squeeze of futures shorts...


Treasury Futures (prices) are dumping and imply yield 10-12bps higher than Friday's close.

Which merely normalizes TSYs to where ES is trading...


So, in a nutshell,  Gold 1x beta to the USD, Silver 2x, and WTI 3x, EURJPY and ES in line and stalled for now, and ES and TSYs in line (having caught up) and stalled for now.


Charts: Bloomberg

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Atomizer's picture



EU membership rant: Listen here you conservative scumbags, we have paid into the system and can no longer pay back the bank interest loans. We didn’t know they were hedging our monies we put into the system as a guaranteed GDP growth chart bullshit illustration. You idiots in the USA are going to find out how the banking industry bled your social security funds. 

The Police - Message In A Bottle



I am Jobe's picture

What now. All the Sheeples care about kardashians and the fucking Black Friday Sale. Also don't forget the new IPHONE and APPS , and life is good for the slaves.

smlbizman's picture

i just explained to my wife that europe is the burning fuse and that fuse leads to the stick of dynamite that is the good ole ussa....she is starting to get it...

fockewulf190's picture

It´s more like the doomsday missle from Beneath the Planet of the Apes...when it goes off, it's going to take the entire world economy out.

veyron's picture

rally -> better entry point for a EURUSD short

stocktivity's picture

Shorts get creamed....longs get creamed.  The big bankers will get it all eventually. The market is all rigged against you and I, the small investor. Stay on the sidelines. It's all Bullshit!

The Monkey's picture

This is a frigging awesome market - 2 massive bear markets, seemingly endless vapor rallies, breathtaking corrections, confused range bound volatility.

What more could you really ask for?

CCanuck's picture

More popcorn, and a new lazy boy chair, I seemed to have worn this one out ....waiting.

Put on 35lbs. eat'n popcorn...wTF!

VonManstein's picture

momentary $5 spread on gold earlier and looked like serious dumping at the open. cartel dumping so as to get out of shorts?

Im with saxo and imy chart shows a drop to 1560 is before shooting straight back up above 1600..

normal or am i missing something?

i am pretty new to all this

SolidSnake961's picture

told ya, dont fight the bull ramp up, short and get squeezed by no news or slightly good sounding news

devo's picture

What bull ramp? The S&P is at 1999 levels. This is a 13 year (and counting) bear market.

SolidSnake961's picture

short term bull ramp, we went down but any short term solution keeps pushing the market back up, all im saying is that shorting the s&p is useless

devo's picture

I agree. Until it isn't. But timing that is a bitch. I'm thinking post-election...makes logical sense, but that's a strong time of year for markets so maybe not until next spring.

SolidSnake961's picture

yea, i came close many times to initiating a short but these rallys and algo absurdity is too the uncertainty of lord bernank's words on the market

devo's picture

Same. I've lost 15% this year doing logical and technical shorts. If that's the way it's going to be I just won't go to the casino. Retail consists of shorts, and they've driven us all out. It's part of the reason the rallys limp...can't imagine there is much covering so all they can do is find a greater fool/dumber algo.

beachdude's picture

Just short FB. July 25 puts at around $31 level 2 weeks ago and a 4 bagger already. On its way to 20, imho.

The Monkey's picture

I'll bet more buyers pile in.  Puts should get cheaper.

devo's picture

Yeah, FB and Apollo Group.

I think AMZN and CMG and obvious shorts, too, but the algos love them for some reason.

HarryM's picture

And LNKD should be $9 but it's not

The Monkey's picture

Go look at the charts in 2007 and 2008 (or even more, 1998-2000).  The stock market is stupid.  It will rally hard on foundation made of marshmellows with the roof on fire. 

So many people are long treasuries, I think we could get some rotation into stocks on this one.  Yields on treasuries, bunds and JGBs are full retard.


CvlDobd's picture

When treasuries break they will take everything else down for the ride.

The Monkey's picture

As scary as this sounds, I don't buy that treasuries are done with their long term rally. But yields could work a lot higher if Europe suddenly becomes somewhat proactive.

Don't think for even a second that they don't have plans for dealing with whatever Greece hands them. The big short is waiting on the other side of all of this. Not the end of the world, just a scary recession where earnings mean revert.

VulpisVulpis's picture

Perhaps you should try "anti-logical" positons. Not illogical, but Anti Logical. In the immortal way of George Costanza:  

The Monkey's picture

It wasn't useless if you shorted above 1400 and closed below 1300.

jcaz's picture

yer a freaking gen-u-as.......

Hey, is the sun coming up tomorrow?

francis_sawyer's picture

Gas up the motor home...

XRAYD's picture

Dow Futures UP  150!

maxmad's picture

sell it hard!  The Spanish deal is already wavering... Futures will be blood red by the open in the morning.

The Monkey's picture

I disagree.  I think this puppy is going to push for a while, again.

Don't get suckered into a bearish looking opening anytime soon. 

Wm the Shrubber's picture

Another bitch slapping for shorts on can-kicking yet meaningless government actions.  The algos play while investors increasingly want nothing to do with markets.  With each incremental fabrication, the end gets closer and nastier.  Bring it!

Captain Benny's picture

Get ready for a week of volatility as Europe goes full retard on the latest unfunded bailout.  Weakend bondholders jumping ship after this stupid rally, which means the only monetary asset left gets a bid,  Celente's GGGs are in play these next few months: Gold, Guns, and a Getaway plan ...


Its time to get away from Europe financially.  Everyone knows the USD will follow after its all said and done.  Thats when Guns come into play.  2012-2013 is going to be marked with violence against the govts of the world.  Then GOLD comes in to play as people seek to stabilize the broken markets.

Pretorian's picture

Though Tyler will skip comment EUR spike.

Tom Green Swedish's picture

Swiss have to buy a bucket load of Euro's now?

evolutionx's picture

Dummies guide to what went wrong in Europe

Helga is the proprietor of a bar. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem she comes up with a new marketing plan that allows her customers to drink now, but pay later.


GS-DickinDaMuppets's picture

Are you SURE we don't need any brakes going down this mountain......


...doing GOD's work...GS-DickinDaMuppets

jekah's picture

So Spain and Italy are tied (get with the program, this is the really important stuff) in the aptly named Euro Cup. Goes to penalty kicks and the winner gets a Trillion of said Euro. Problem solved. See you next year for the rematch.

anonnn's picture

Hugo Salina Price proposes silver coin for Greece. On Max Keiser RT Today:

john_connor's picture

Enjoy while it lasts.  GREXIT inbound.

CvlDobd's picture

Stawks are hawt shawty! Get me sum uh dat ES foo!

Tom Green Swedish's picture

I like the (For Now), Tyler definitely knows his stuff.  Dow / S&P surged a little right after TARP as well for 1 week than later dumped 25 percent.  A little "pop" was expected here.  As we all know this little headlines that come out of Europe (that seem to pump up the market, usually on the weekends for a fresh nice start to the week showing us everything is fine and fixed) does not mean anything is "fixed" it is just a little smoke and mirror attempt once again and the contiuation of the trend will keep going into who knows when.  Probably either a psychological trick or a technique used by bankers to utilize these "pops" first.


What a bunch of tools

pleseus's picture

All in the world is good.  No new QE in June.

CrashisOptimistic's picture

Yup.  Exactly.  None.

And have you noticed how austerity became a dirty word in the past 6 weeks or so, just as soon as it became clear a move in January towards reduced deficit in the US was going to empty some gov't cubicles?

Law97's picture

Spain was but one factor of many that have been hitting stocks.  The macro picture is still rapidly deteriorating and the Spailout only confirms this.  Only a month ago we were assured everything was under control in Spain.  $120B is good for a about a two hour bounce.  Bounce may even be over once U.S. markets open.  Don't see how this would be good for anything more.  Just adds to the fear that things are truly coming apart.

Venerability's picture


With Risk On making a comeback this week, time for Zero Hedge to push against JPM and The Largest Silver Short in Human History very hard.

As I said before, JPM has gone from Dr. No to Dr. Evil in many market participants' perception.

It's high time they started rebalancing the Planet via Silver.