A month ago Goldman told its clients to go long the EURUSD with a 1.35 stop. The stop was triggered within a week. Then the firm flipflopped and followed up with a diametrically opposite call. That call was also stopped within a few days. Goldman learned its lesson. But not Citi: the nationalized firm, whose stock, together with that of bankrupt Ambac, has just issued a long EURUSD call at 1.359. The call by technical analyst Aron Gera, proposes a stop at 1.349. In other words it is now Citi's turn to offload its EUR book. Gera's recommendation is based on technical analysis, which, in the form of momentum chasing, is all that seems to work these days. Aron thinks the EUR could surge to an 11-week high, even as the GBPUSD could jump as high as 1.5966 alongside EUR strength.
And while daily news out of Greece (loaded fire-extinguisher) and Germany (unloaded and unwilling gun) determine the EUR level more than any charts or patterns, an observation out of Citi we agree with is that for the U.S. dollar, the recent strength hasn’t come from it being considered a strong alternative, just that there really is no other alternative except for the yen or gold. It is well known how happy the BOJ is with rising rates... Soon, when the third lap of the F/X debasement race starts, we expect the rush out of all currencies to intensify, with commodities benefiting. The problem for the administration: once oil goes over $100 and rumblings of a mort revolt shake up the Capitol, the Fed will have no option but to hike. Which it can't. So we believe the market will be manipulated to leave oil in the $85-95 bbl range, and let the fiat outflow capital redirect primarily into gold.