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Thursday, March 28, 2024

Goldman Out In Full EURUSD Destruction Mode

Courtesy of Tyler Durden

1. EURUSD– Now decisively breaking the uptrend from the February ’02 lows at 1.3098

 

– Adds to the underlying negative picture with a test of the prior lows from March-‘09/October-’08; 1.2457-1.2329 likely

– Beyond there the low from November ’05 stands at 1.1640 and the ABC equality target from the July-’08 highs stands at 1.1434

– If the market does bounce sharply the first notable resistance would be the interim low from 28th April at 1.3114 and also the psychologically significant 1.30

 

 

 

2. Inverse-EURUSD overlaid with 10-year Eurozone-Periphery/-Core Spreadbasket– Continues to imply much lower levels for EURUSD

 

– This chart is an update of the one we’ve shown a few times over recent weeks

– It’s inverse-EURUSD in green (higher is EUR-weakness) overlaid with an equally weighted basket of Greek, Italian, Spanish, Portuguese and Irish 10-year yields versus those of Germany

– The spread basket has now spiked significantly higher and in pure overlay terms implies EURUSD sub-1.10

– While the point for point correlation may well weaken, this does still seem very important as moves in the spread basket have tended to lead those of EURUSD itself over recent months

 

Chart Source: Aspen Graphics     Data Source: Reuters

 

 

3. Spanish 10-year yields– Purely technically speaking, this looks like something we need to keep a very close eye on

 

– As detailed in previous notes sharp downside moves in EURUSD over recent months have tended to be lead by widening in Eurozone-Periphery/-Core spreads

– Greek and Portuguese yields have already widened significantly versus Germany, but purely technically speaking, a significant spike higher in Spanish yields now also looks a real risk

– 10-year Spanish yields are now breaking the downtrend from the July ’08 highs, and are also moving above the interim high from January ’10 at 4.19%

– The next resistance stands at 4.46-4.48%, but the wedge like nature of the price action since the July ’08 highs makes a re-test of that high itself at 4.94% look quite feasible

Please note, the above is purely based on technical/price action analysis

 

 

 

4. EUR/Broad Index– Now only approximately 0.5% from the major lows from November ’05

 

– As with the multi-year uptrend on EURUSD which stood at 1.3098 we may see some consolidation against this level…

– …however, given the broad correlated market backdrop and the setup on important components such as EURUSD it’s difficult to actively argue for a notable bounce/stabilisation

– Our EUR/Broad Index shows the performance of the EUR versus an equally weighted basket of the “Old World G10” currencies

 

 

 

5. 1-year EURUSD/USDJPY implied vol. spread– EURUSD vol. looks set to rise significantly further versus USDJPY

 

– We included this chart in the Charts That Matter Next Week a few weeks back

– It implies that EURUSD 1-year implied vol. rises significantly versus that of USDJPY

– It’s moved quite a bit already, but if viewed as a double bottom/swing within the cyclical range the spread looks set to move significantly further in favour of EURUSD vol.

– The cyclical high of EURUSD 1-year vol. over USDJPY 1-year from January ’09 stands at approximately +4.5 vols. compared with the current +0.56

– In the current environment it would seem reasonable to assume higher EURUSD vol. would be associated with lower-EURUSD

 

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