Goldman's Latest FX Mea Culpa: "What We Have Is Huge Position Liquidation"

From Goldman's FX Trading Desk

On Tuesday I mentioned that I had turned neutral and cautiously wondered whether the Euro was now a buy on dips rather than a sell on rallies. Not for one moment did I envisage the collapse down to 1.2144 nor amidst the panic did it feel like a buy when we were down there and yesterday I was part of the huge herd that chose to sell into the eur/chf brick wall at 1.4005, only to pay the price later.

What we have seen in the past 24 hours is huge position liquidation with all the favoured trades being cut regardless of their correlation to broader risk asset ; positioning now must be much lighter. The euro from here is a very tough call and I'm still inclined to try and trade opportunistically intraday within the context of a range rather than have a strong directional bias. To the topside the 1.2445 level has capped repeatedly this week and a close above this level would be potentially constructive, though John Noyce has also signalled the significance of 1.2510.  First support should come in at the Asian low of 1.2321 with the key support at the years low (1.2144) and the much advertised 50% retracement level of 1.2134 .
Good luck