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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


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Sun, 06/10/2012 - 18:17 | 2512835 Atomizer
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



Sun, 06/10/2012 - 18:20 | 2512843 I am Jobe
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.

Sun, 06/10/2012 - 18:39 | 2512890 smlbizman
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...

Sun, 06/10/2012 - 21:03 | 2513108 fockewulf190
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.

Sun, 06/10/2012 - 22:34 | 2513219 Richardk888
Richardk888's picture

How about this?

Italian Bank declares Holiday...

Sun, 06/10/2012 - 18:18 | 2512837 veyron
veyron's picture

rally -> better entry point for a EURUSD short

Sun, 06/10/2012 - 19:36 | 2512983 stocktivity
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!

Sun, 06/10/2012 - 20:43 | 2513075 The Monkey
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?

Mon, 06/11/2012 - 01:48 | 2513448 CCanuck
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!

Sun, 06/10/2012 - 18:18 | 2512838 BlueStreet
BlueStreet's picture


Sun, 06/10/2012 - 18:18 | 2512840 VonManstein
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

Sun, 06/10/2012 - 18:19 | 2512841 SolidSnake961
SolidSnake961's picture

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

Sun, 06/10/2012 - 18:31 | 2512872 devo
devo's picture

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

Sun, 06/10/2012 - 18:37 | 2512883 SolidSnake961
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

Sun, 06/10/2012 - 18:53 | 2512918 devo
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.

Sun, 06/10/2012 - 19:32 | 2512979 SolidSnake961
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

Sun, 06/10/2012 - 20:18 | 2513043 devo
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.

Sun, 06/10/2012 - 20:41 | 2513073 beachdude
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.

Sun, 06/10/2012 - 20:47 | 2513083 The Monkey
The Monkey's picture

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

Sun, 06/10/2012 - 20:49 | 2513087 devo
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.

Sun, 06/10/2012 - 22:16 | 2513187 HarryM
HarryM's picture

And LNKD should be $9 but it's not

Sun, 06/10/2012 - 21:03 | 2513107 The Monkey
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.


Sun, 06/10/2012 - 21:32 | 2513134 CvlDobd
CvlDobd's picture

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

Sun, 06/10/2012 - 21:55 | 2513162 The Monkey
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.

Sun, 06/10/2012 - 22:19 | 2513189 VulpisVulpis
VulpisVulpis's picture

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

Sun, 06/10/2012 - 20:45 | 2513080 The Monkey
The Monkey's picture

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

Sun, 06/10/2012 - 18:34 | 2512876 jcaz
jcaz's picture

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

Hey, is the sun coming up tomorrow?

Sun, 06/10/2012 - 18:22 | 2512846 francis_sawyer
francis_sawyer's picture

Gas up the motor home...

Sun, 06/10/2012 - 19:40 | 2512990 tom a taxpayer
tom a taxpayer's picture

See the USA in your Chevrolet!

Sun, 06/10/2012 - 21:28 | 2513128 SilverTree
SilverTree's picture


Sun, 06/10/2012 - 18:23 | 2512847 XRAYD
XRAYD's picture

Dow Futures UP  150!

Sun, 06/10/2012 - 20:29 | 2513057 maxmad
maxmad's picture

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

Sun, 06/10/2012 - 20:50 | 2513090 The Monkey
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. 

Sun, 06/10/2012 - 18:26 | 2512853 Wm the Shrubber
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!

Sun, 06/10/2012 - 18:27 | 2512856 Captain Benny
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.

Sun, 06/10/2012 - 18:29 | 2512865 Pretorian
Pretorian's picture

Though Tyler will skip comment EUR spike.

Sun, 06/10/2012 - 18:29 | 2512866 Tom Green Swedish
Tom Green Swedish's picture

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

Sun, 06/10/2012 - 18:29 | 2512867 evolutionx
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.


Sun, 06/10/2012 - 18:30 | 2512868 GS-DickinDaMuppets
GS-DickinDaMuppets's picture

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


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

Sun, 06/10/2012 - 18:31 | 2512870 jekah
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.

Sun, 06/10/2012 - 18:31 | 2512873 anonnn
anonnn's picture

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

Sun, 06/10/2012 - 18:40 | 2512891 hugovanderbubble
hugovanderbubble's picture

Long THLD till 15$

Sun, 06/10/2012 - 18:47 | 2512904 john_connor
john_connor's picture

Enjoy while it lasts.  GREXIT inbound.

Sun, 06/10/2012 - 18:53 | 2512915 CvlDobd
CvlDobd's picture

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

Sun, 06/10/2012 - 18:56 | 2512922 Tom Green Swedish
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

Sun, 06/10/2012 - 19:03 | 2512935 q99x2
q99x2's picture

Risk On Dog.

Sun, 06/10/2012 - 19:09 | 2512945 pleseus
pleseus's picture

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

Sun, 06/10/2012 - 19:17 | 2512955 CrashisOptimistic
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?

Sun, 06/10/2012 - 19:23 | 2512960 Law97
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.

Sun, 06/10/2012 - 19:23 | 2512964 Venerability
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.



Sun, 06/10/2012 - 19:34 | 2512981 SolidSnake961
SolidSnake961's picture

why have hedge funds not began destroying jpm on this too like they did with the london whale?? what are they waiting for?

Sun, 06/10/2012 - 19:44 | 2512998 Sophist Economicus
Sophist Economicus's picture

If the bullion banks can create as much paper silver as they want, how does any rational person really ever expect to win that game by taking the other side?  

In addition, the paper markets in Gold and Silver don't have to be settled in physical, they can settle the contract out for cash.   If I were 'playing' in the paper casino, I would take the short side with the big boys, since there is no constraint on  the 'supply' of short paper contracts.


Sun, 06/10/2012 - 21:01 | 2513101 Paul Atreides
Paul Atreides's picture

Sophist Economicus how about you pull your wealth out of the system in protest at this fraud. Your continuing participation in their fraudulent games is only extending them, buy physical silver and gold and help us end this corruption.

Sun, 06/10/2012 - 19:38 | 2512988 hero HNL
hero HNL's picture

Tokyo will open in 30mins. I want to see how

long eur.usd will hold.....probably until NY opens.


Over the weekend, China had bad econ numbers.

Sun, 06/10/2012 - 23:31 | 2513325 The Monkey
The Monkey's picture

If China had bad numbers (and I haven't seen them), I would expect the rally to last a while. Central banks are next up.

Sun, 06/10/2012 - 19:41 | 2512993 Arnold Ziffel
Arnold Ziffel's picture
Vestas CEO sees U.S. market down 80 percent in 2013


Sounds like he has a Bee in his Bonnet.

Sun, 06/10/2012 - 19:58 | 2513015 rumblefish
rumblefish's picture

i would think this move would weaken the euro, driving the $ up, thus pushing down equities.....why are equities up?

Sun, 06/10/2012 - 20:04 | 2513022 Tsar Pointless
Tsar Pointless's picture

"Why are equities up?"


No - wait. Hahahahahahahaha!

Okay. Now. Hahahahahahahaha!

Oh, my. My my my.

Where in the hell have YOU been since March 2009?

And Tyler(s) - didn't you say just the other day that it is no longer "risk on/risk off", but rather "reality on/reality off"?

Shouldn't you edit the post to reflect this long-overdue change?

Why are equities up, indeed.

Sun, 06/10/2012 - 20:13 | 2513035 orangegeek
orangegeek's picture

The long term trend remains pointed down.

Sun, 06/10/2012 - 22:05 | 2513169 The Monkey
The Monkey's picture

Agreed. I will be very surprised if the S&P can get back to 1422, though I wouldn't be surprised if it retraces all the way back to 1421 !!!

Sun, 06/10/2012 - 20:31 | 2513062 GoldbugVariation
GoldbugVariation's picture

With all markets gapping up on the open today, we may see a gap fill by the day's end, like the one which happened on 4 May (in reverse).

Sun, 06/10/2012 - 20:35 | 2513067 adr
adr's picture

I thought printing billions of currency units was suposed to cause the value of that currency to go down?

Or is it that bankrupt Spain will no longer be bankrupt so that makes Europe stonger?

I'm not really getting it.

How about programming ATMs to randomly give out $1000 to customers. You ask for $20 and you get $1020. The extra is agift from uncle sam. It won't be a bailout or a stimulus because it will be random. It will stimulate the economy because people will have money to burn. Why the fuck not.

Why not just print away the world's debt. No more dancing around the issue. If Spain can get all the cash they need with no conditions, then fuck my bank. I should be able to get $100k to pay off my mortgage. FREE MONY FOR ALL!

We've gone far past the revolutionary spark. Heads should already be rolling.

Sun, 06/10/2012 - 21:58 | 2513151 oldman
oldman's picture


Dude, that is the greatest idea that I have heard since I learned the word 'bankruptcy'

I really like it better than giving the dough to the banks to gamble with----------------------

but-------------------------I don't use an ATM, so how do I get a chance to play????

And what this madness posted below----I can't find a thing on it anywhere


Sun, 06/10/2012 - 21:26 | 2513121 new Seize Mars
Vote up!

Vote down!




Bank Holiday in Italy. Bank BNI shuts its doors, will not allow any withdrawals or money transfers electronically

Thanks for a great belly laugh--a million vote idea    all pluses        om


Sun, 06/10/2012 - 20:45 | 2513070 RobotTrader
RobotTrader's picture

Nickname for this tape:


"Like It Never Even Happened"

ES now up over 85 from last Sunday night's lows.

All I can say is "Wow, Wow, Wow, etc."

Strongest tape I've ever seen, the market just doesn't want to go down with all the horrific news.

We should be below 8,000 by now.

Sun, 06/10/2012 - 20:43 | 2513076 RobotTrader
RobotTrader's picture

Everybody and their brother is bearish in the Podcast world.


Jim Puplava a raving bull a month ago, now he's snarling bearish.

This is the same guy who was pushing "Peak Oil" nonsense with Chris Martenson and James Kunstler back in 2007 - 2008.

Gas in Greenville, SC can now be had for $2.89/gal. now.

Man, did those guys get it wrong.........

Sun, 06/10/2012 - 21:34 | 2513139 CvlDobd
CvlDobd's picture

You obviously do not live near western north and south carolina. Their economies are dead. For some reason the BMW and other plants in SC aren't doing much to grow the outside economy. Disregard the market for two seconds and something is fundamentally broken in those areas (my hunch is everywhere). Drive on some back roads and you will see some amazing poverty in these areas.

Sun, 06/10/2012 - 22:13 | 2513183 The Monkey
The Monkey's picture

Yeah, I have to say, this looks like a market that wants to levitate again. It is amazing and should set up one of the best shorts ever, but patience is key.

Sun, 06/10/2012 - 20:54 | 2513085 newengland
newengland's picture

The euro/usd sideshow bores me, so it gives me very great pleasure to look upon the Asian market opening as we write, and see both gold and silver rising as the world's oldest civilisation votes with its money, and proves yet again that its people will outlive the bankster's puppets in politics and the Politburo.

Ordinary people, entrepreneurs and genuine capitalists - gotta love 'em!

Central banksters and their pretty precious political elite...not so much.

Sun, 06/10/2012 - 21:09 | 2513115 Arnold Ziffel
Arnold Ziffel's picture

India hitting the skids:


Indian retailers retrench as reform hopes dashed


It seems improbable that retailers could be in such trouble in India. They have the world's second-largest population, increasingly affluent consumers, and limited competition.

But things are tough for supermarkets, a relatively new business sector in India, with every major chain losing money. The economy has lost momentum, compounding problems of high food inflation and low retail prices, and expensive real estate.


Bubble, bubble, boil and trouble...

Sun, 06/10/2012 - 22:28 | 2513204 The Monkey
The Monkey's picture

This news article means India is ready to rally!

Sun, 06/10/2012 - 21:33 | 2513121 Seize Mars
Seize Mars's picture



Bank Holiday in Italy. Bank BNI shuts its doors, will not allow any withdrawals or money transfers electronically for the next MONTH

I found this

Sun, 06/10/2012 - 21:22 | 2513122 chinaguy
chinaguy's picture

I don't short shit.... & I'd short this nonsenses until about 11:00 AM EST

Sun, 06/10/2012 - 21:48 | 2513154 dragoneyes74
dragoneyes74's picture

This should force a short covering rally into either the Greek election potential mess or the no QE3 Bernanke announcement next week when everything will reverse for 6 weeks, then run-up into the real QE3 announcement at the end of August.  That's what I'm playing.  Hopefully, the headlines will cooperate. 

Sun, 06/10/2012 - 22:09 | 2513176 AllWorkedUp
AllWorkedUp's picture

Oh yeah but look gold isn't enjoying the risk on trade. Big effing surprise.

Sun, 06/10/2012 - 22:13 | 2513184 AU5K
AU5K's picture

Subordination is bullish.

Mon, 06/11/2012 - 03:56 | 2513639 GernB
GernB's picture

True it could cause the market to drop and if the market drops there could be more QE which is bullish. If the market droping is bullish, then so must be any bad news.

Sun, 06/10/2012 - 22:34 | 2513217 Shibumi2
Shibumi2's picture

It puzzles me how the bullion pricing of Ag and Au is TIED to paper contracts.


The so-called "market" equally values one ounce of PHYSICAL GOLD to a paper promise of one ounce. As the paper is a PROMISE TO PERFORM and requires the performance of a COUNTERPARTY, it is completely illogical why there is no MARKET PREMIUM to the paper promise. Are GOLD and SILVER the only examples where performance risk is not compensated in the pricing?


Particularly in light of the fact that it is a well known fact that COMEX physical inventories are leveraged maybe 100:1 paper to physical. Therefore, a rational market would demand a premium for the paper contract since it is indisputable that should all contracts demand physical redemption, it is not possible for the COMEX to perform.


Irrational indeed. Where is the SEC?



Mon, 06/11/2012 - 04:00 | 2513640 GernB
GernB's picture

Dude. It's gambling. Neither party in the contract wants the exchange, which reduces it to gambling, plain and simple. Heaven forbid you should gamble online in Texas Hold'em because people are too irresponsible not to blow all their money. On the other hand. Futures markets, are 99% gambling, but there's no problem there at all.

Sun, 06/10/2012 - 23:35 | 2513331 Grand Supercycle
Grand Supercycle's picture

Rally Warning from last week:

'Daily chart now gives bullish warning and significant
SPX rally & USDX retracement should commence in a week or so'

Sun, 06/10/2012 - 23:37 | 2513335 Fredd00
Fredd00's picture

I told you so... the mother of all squeeze just begun

Mon, 06/11/2012 - 03:54 | 2513634 GernB
GernB's picture

ES shot up to 1342 then fell back to 1338 where it stayed several hours after the open. Given the quickness of the rally it seemed like a panic buy on the assumption the good news would cause a rally, except it seemed to quick and too far (more than 1%). A short at 1338 with a stop at 1343 would risk $250 a contract. It is now trading at 1334 which would net you $200 a contract so far, you could lower your stop to break even and see what the rest of the night holds.

Mon, 06/11/2012 - 15:59 | 2515838 GernB
GernB's picture

With the ES now at $1301 close to Monday's close, this trade is now profitable at $1750 per contract. Not bad for a $250 risk.

Mon, 06/11/2012 - 06:17 | 2513724 cnhedge3
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