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EURUSD Slides To 2 Year Low As Reality Supercedes Hope

Tyler Durden's picture





 

European credit markets - sovereign, financial, and corporate - have all slumped dramatically in the last two days - massivley underperforming the ever-hopeful equity markets. Even though broadly European stocks (the BE500 or STOXX) are only retraced by around 25% off their post-summit highs, individual markets (and especially financials) have retraced almost 100% of the gains with Spain's IBEX seeing its biggest 2-day drop in 7 months and closing unch anged from pre-Summit levels. EURUSD is the story though as it plunges to two-year lows  at 1.2266 - over 400pips from its post-summit euphoria highs as QE3 hopes are dashed by muddling through US data. The disconnect between US and European equity indices and the rest of the world's more idiosyncratic risk markets remains unsustainable and as we have said before again and again "credit anticipates and equity confirms".

 

EURUSD at 2 year lows... plunging over 400 pips in the last few days - as NEW QE chances drop to under 25%

and equity and credit remain massively disconnected...

 

Spanish and Italian equity indices have fallen off the hope-cliff in the last two days but away from them - equity indices remain +3.5 to +4.5% from last week's pre-Summit...

and Spain, Italy, and Portugal are now all notably wider than pre-Summit levels - as notably Bunds have outperformed Treasuries by 16bps in the last week...

 

Charts: Bloomberg

 


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Fri, 07/06/2012 - 12:13 | Link to Comment drink or die
drink or die's picture

Time for another summit announcement...

Fri, 07/06/2012 - 12:15 | Link to Comment camaro68ss
camaro68ss's picture

hahaha you beat me to it!

maybe batman towels will do it?

Fri, 07/06/2012 - 12:19 | Link to Comment BaBaBouy
BaBaBouy's picture

They will all be Running To Mother GOLD, sooner or later...

 

Mother GOLD, Bitchez ...

Fri, 07/06/2012 - 12:24 | Link to Comment Bastiat009
Bastiat009's picture

One day maybe, but for now they are running away from gold and very very fast ... they even picked up the pace after 12 ET.

It may not be right, it may not last, it may not make sense, but they running to the US$.

Fri, 07/06/2012 - 12:45 | Link to Comment Sancho Ponzi
Sancho Ponzi's picture

If the ERU/USD breaches 1.20 there is no support until 1.11-1.12. Keep those stops tight, FOREX traders.

Fri, 07/06/2012 - 14:46 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Please feel free to alter the names and insert plot twists as you see fit, based on current EuroZone events and clowns...I mean politicians and banksters (central/fractional and 'private sector' [i.e. sucking on the teet of taxpayers/wards of nanny state] scumbags included):

 

 

Rumpelstilzchen / Rumpelstiltskin

In order to make himself appear more important, a miller lied to a king, telling him that his daughter could spin straw into gold. The king called for the girl, shut her in a tower room with straw and a spinning wheel, and demanded that she spin the straw into gold by morning, for three nights, or be executed (other versions have the king threatening to lock her up in a dungeon forever). She had given up all hope, when an impish creature appeared in the room and spun straw into gold for her in return for her necklace, then again the following night for her ring. On the third night, when she had nothing with which to reward him, the strange creature spun straw into gold for a promise that the girl's first-born child would become his.

The king was so impressed that he married the miller's daughter, but when their first child was born, the imp returned to claim his payment: "Now give me what you promised." The queen was frightened and offered him all the wealth she had if she could keep the child. The imp refused but finally agreed to give up his claim to the child if the queen could guess his name in three days. At first she failed, but before the final night, her messenger discovered the imp's remote mountain cottage and, unseen, overheard the imp hopping about his fire and singing. there are many variations in this song, the 1886 translation by Lucy Crane reads:

Today do I bake, to-morrow I brew,
The day after that the queen's child comes in;
And oh! I am glad that nobody knew
That the name I am called is Rumpelstiltskin!

However, most American children today know it as:

Today I brew, tomorrow I bake;
And then the Prince child I will take;
For no one knows my little game
That Rumpelstiltskin is my name!

German:

Heute back ich, morgen brau ich,
Übermorgen hol ich mir der Königin ihr Kind;
Ach, wie gut, dass niemand weiß,
dass ich Rumpelstilzchen heiß.

When the imp came to the queen on the third day and she revealed his name, Rumpelstiltskin lost his bargain. In the 1812 edition of the Brothers Grimm tales, Rumpelstiltskin then "ran away angrily, and never came back". The ending was revised in a final 1857 edition to a more gruesome version where Rumpelstiltskin "in his rage drove his right foot so far into the ground that it sank in up to his waist; then in a passion he seized the left foot with both hands and tore himself in two." Other versions have Rumpelstiltskin driving his right foot so far into the ground that he creates a chasm and falls into it, never to be seen again. In the oral version originally collected by the brothers Grimm, Rumpelstiltskin flies out of the window on a cooking ladle.

 

Fri, 07/06/2012 - 13:08 | Link to Comment TWSceptic
TWSceptic's picture

Right now gold isn't acting as a safe haven and commodities are under pressure with China slowing down. It looks bad for gold and silver in the short term, long term (>6 months) you have to stay bullish.

Fri, 07/06/2012 - 12:16 | Link to Comment BaBaBouy
BaBaBouy's picture

Yes, Mother GOLD...

Fri, 07/06/2012 - 12:18 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

+ 1

Yes, gold is the safe harbor.

 

Disclosure, we want the euro to go down more, to make out trip to Italy cheaper...

Fri, 07/06/2012 - 12:24 | Link to Comment Stuart
Stuart's picture

It's not a gold being sold story today, it's the US dollar is being bought, and that's likely short covering.  Gold near all time highs in Euros.

Fri, 07/06/2012 - 12:15 | Link to Comment SHEEPFUKKER
SHEEPFUKKER's picture

Both the USD and EUR will ultimately be vertically challenged. 

Fri, 07/06/2012 - 12:32 | Link to Comment TruthInSunshine
TruthInSunshine's picture

- "Time for another summit announcement..."

 

Whereupon the blind mice will drink expensive wine and consume the finest meats & cheeses at an ultralux resort, and declare...

 

"My God! It's loaded with debt!"

 

...and schedule a future meeting for purposes of trying to inject more debt/stimulus/heroin/cancer into the system (in a zero sum game where even the rock-level stupidest among them, as in most, realize they may be MarieAntoinette'd if they go first).

Fri, 07/06/2012 - 12:28 | Link to Comment Marginal Call
Marginal Call's picture

Summit announcement?  Nah, they are quite intentionally devaluing the currency.  This is what they want.

 

Anybody trading against it is stepping in front of a central bank and is possibly insane. 

Fri, 07/06/2012 - 12:51 | Link to Comment timbo_em
timbo_em's picture

...starting with "I have a plan that one day these nations..."

I offer 4 to 1 (paper money only) that we will either see a central bank intervention or two summits by the end of September (the next regular summit is scheduled for mid October).

Fri, 07/06/2012 - 12:13 | Link to Comment strongband
strongband's picture

Has anyone seen my shirt? I seem to have lost it this week.

Fri, 07/06/2012 - 12:13 | Link to Comment mrktwtch2
mrktwtch2's picture

when does nigel farage..give them another reading of the riot act??

Fri, 07/06/2012 - 12:13 | Link to Comment transaccountin
transaccountin's picture

but what happend to the epic short squeeze and record shorts? i hope they didnt get scared away

Fri, 07/06/2012 - 12:23 | Link to Comment strongband
strongband's picture

it would appear that they indeed did get scared away.

Fri, 07/06/2012 - 12:14 | Link to Comment DavidJ
DavidJ's picture

My shorts are happy!

Fri, 07/06/2012 - 12:15 | Link to Comment DavidJ
DavidJ's picture

finally!

Fri, 07/06/2012 - 12:15 | Link to Comment Hedgetard55
Hedgetard55's picture

Recovery Summer 3.0 here in the US not helping? How can this be?

Fri, 07/06/2012 - 12:15 | Link to Comment FranSix
FranSix's picture

U.S. ten year yields at historic lows:

 

http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/

Fri, 07/06/2012 - 12:49 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

It truly is astonishing how people can look at that and imagine that a desired-for-gold inflation is foretold by it.

Fri, 07/06/2012 - 12:16 | Link to Comment fonzannoon
fonzannoon's picture

When the S&P hits 900 I will admit that equities "confirm". S&P at 1350 is not confirming much.

Fri, 07/06/2012 - 12:18 | Link to Comment BeerBrewer09
BeerBrewer09's picture

delete

Fri, 07/06/2012 - 12:18 | Link to Comment alien-IQ
alien-IQ's picture

if the EUR/USD closes below 1.2275, it'll test 1.2150 early next week. I'd look for a little bounce around that range. But it'll be short lived. Eventually...parity.

Fri, 07/06/2012 - 12:21 | Link to Comment BeetleBailey
BeetleBailey's picture

My advice?

Short term bounce up to 1.24....then down she goes....

Short the piss out of it @ 1.24.....

Fri, 07/06/2012 - 12:28 | Link to Comment ChubbNut
ChubbNut's picture

That is my price point as well.

Fri, 07/06/2012 - 12:35 | Link to Comment alien-IQ
alien-IQ's picture

I'd keep an eye on the $DXY. Should hit some hard resistance at about 83.50ish.

Fri, 07/06/2012 - 12:32 | Link to Comment alien-IQ
alien-IQ's picture

that's about right. the only question is will the bounce be off of 1.2275 or 1.2150. But yes, 1.24 should be the ceiling for that short term bounce. Then it's heading to 1.18 before the next dead euro bounce.

Fri, 07/06/2012 - 12:26 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

$1.2276 at 12:27...

Fri, 07/06/2012 - 12:28 | Link to Comment strongband
strongband's picture

you're forgetting the EURUSD's ability to go FR (full-retard)

Fri, 07/06/2012 - 12:52 | Link to Comment mark7
mark7's picture

Like last summer and summer before that? How many times you are going to do this losing game. Every time eur-usd goes near 1.20, it bounces soon after back to 1.30-1.40

Fri, 07/06/2012 - 13:50 | Link to Comment alien-IQ
alien-IQ's picture

What are you talking about? You don't know me. You don't know what, how, when or why I trade.

Don't be so presumptuous.

Fri, 07/06/2012 - 12:20 | Link to Comment Stuart
Stuart's picture

European exporters will gain as a result, US exporters will suffer as a result.   The FED cannot be pleased.   Currency wars baby!

Fri, 07/06/2012 - 12:23 | Link to Comment fonzannoon
fonzannoon's picture

does it matter if the US exporter's suffer if the share prices are propped up? Do you think anyone actually gives a shit about the underlying economy? Listen to George Carlin. He spelled it out.

Fri, 07/06/2012 - 13:05 | Link to Comment gjp
gjp's picture

Damn straight Foz. As if America really exports now anyway outside of food and weapons, both of which have pretty Inelastic demand.

Fri, 07/06/2012 - 12:33 | Link to Comment DavidJ
DavidJ's picture

Look for the bernanke to do something to stop the euro from sinking so much against the dollar. if euro falls below 1.21.

Fri, 07/06/2012 - 12:24 | Link to Comment fuu
fuu's picture

Allow me to channel Bastiat009:

"Euro down, US$ up, gold down. You fail to see the truth."

Fri, 07/06/2012 - 12:29 | Link to Comment azzhatter
azzhatter's picture

Herman Von Rumpboy needs another "turned the corner" proclamation

Fri, 07/06/2012 - 12:46 | Link to Comment q99x2
q99x2's picture

Time to short reality.

Fri, 07/06/2012 - 12:53 | Link to Comment adr
adr's picture

Since the Euro is at 2 year lows, shouldn't crude be testing two year lows, or lower? All I heard for years was that high crude prices were explained by the strong Euro making it cheaper for foriegn investors to buy oil in dollars.

I saw diesel for $3.43 at my local station. Regular unleaded is back to $3.69. Somethin ain't right.

Fri, 07/06/2012 - 12:59 | Link to Comment TWSceptic
TWSceptic's picture

The euro index even worse, over 5 year low. Need more hopium!

Fri, 07/06/2012 - 13:05 | Link to Comment Bastiat009
Bastiat009's picture

So, euro going down is reality ... gold going down is manipulation. Pick and choose your reality, you will never be wrong.

Fri, 07/06/2012 - 13:28 | Link to Comment trilliontroll
trilliontroll's picture

What about Mark Mobius ?

link: http://www.cnbc.com/id/48069167

 

Sat, 07/07/2012 - 09:51 | Link to Comment aubreyfarmer
aubreyfarmer's picture

Can there be any doubt that what we are seeing is all part of a larger scheme to put the US and Europe under the control of International Jew Bankers.  The very same self worshipping, money loving spawn of Hell that have been responsible for most of the death and destruction this world has seen for at least the last 100 years.  Never could the US have fallen so far so fast without it being a part of a planned destruction.  Our media, our monetary system and our government are all controlled by the invisible hand of the International Jews.  Call me anything you like, but that does not change the simple fact that Jews have a license to print money from nothing and with that license they are taking control of our lives, our liberty and our future.  Is the plan to reintroduce the gold standard after all of the fiat currencies fail?  Will this be the vehicle by which we are introduced to a purely electronic currency and the mark of the beast?  Whether or not you believe in Biblical prophecy is of little consequence.  Man has become so corrupt that much of what is done is no longer rational. 

27). "I fear the Jewish banks with their craftiness and tortuous tricks will entirely control the exuberant riches of America. And use it to systematically corrupt modern civilization. The Jews will not hesitate to plunge the whole of Christendom into wars and chaos that the earth should become their inheritance." (Bismarck) 28). "The Christians are always singing about the blood. Let us give them enough of it! Let us cut their throats and drag them over the altar! And let them drown in their own blood! I dream of the day when the last priest is strangled on the guts of the last preacher." (Jewish Chairman of the American Communist Party, Gus Hall). 29). "Wars are the Jews harvest, for with them we wipe out the Christians and get control of their gold. We have already killed 100 million of them, and the end is not yet." (Chief Rabbi in France, in 1859, Rabbi Reichorn). 30). "We Jews regard our race as superior to all humanity, and look forward, not to its ultimate union with other races, but to its triumph over them." (Goldwin Smith, Jewish Professor of Modern History at Oxford University, October, 1981) 31). "We Jews, we are the destroyers and will remain the destroyers. Nothing you can do will meet our demands and needs. We will forever destroy because we want a world of our own." (You Gentiles, by Jewish Author Maurice Samuels, p. 155). 32). "We will have a world government whether you like it or not. The only question is whether that government will be achieved by conquest or consent." (Jewish Banker Paul Warburg, February 17, 1950, as he testified before the U.S. Senate).
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