Goldman's Stolper Speaks, Sees EUR Downside To 1.20 - News and Current Events | futures io social day trading
futures io futures trading

Goldman's Stolper Speaks, Sees EUR Downside To 1.20
Updated: Views / Replies:367 / 0
Created: by kbit Attachments:0

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors – all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you don’t need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Thread Tools Search this Thread

Goldman's Stolper Speaks, Sees EUR Downside To 1.20

  #1 (permalink)
Elite Member
Aurora, Il USA
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: futures
kbit's Avatar
Posts: 5,884 since Nov 2010
Thanks: 3,303 given, 3,334 received

Goldman's Stolper Speaks, Sees EUR Downside To 1.20

By now Zero Hedge readers know that there is no better contrarian signal in the world than Goldman's Tom Stolper: in fact it is well known his "predictions" are a gift from god (no pun intended ) because without fail the opposite of what he predicts happens - see here. 100% of the time. Which is why, following up on our previous post identifying the record short interest in the EUR and the possibility for CME shennanigans any second now, it was only logical that Stolper would come out, warning of further downside to the EURUSD (despite having a 1.45 target).

To wit: "With considerable downside risk in the short term, within our regular 3-month forecasting horizon, the key questions are about the speed and magnitude of the initial sell-off. If we had to publish forecasts on a 1- and 2-month horizon, we could see EUR/$ reach 1.20. In other words, we expect the EUR/$ sell-off to continue for now as risk premia have to rise initially." In yet other words, if there is a clearer signal to go tactically long the EURUSD we do not know what it may be.

From Goldman
The thinking behind our EUR/$ forecast: When we last changed our FX forecasts in early December, we set our 3-month forecast in line with the spot rate at the time at 1.33. However, linked to the view of our European economists that the crisis will deepen initially before the situation improves, we signalled downside risks, potentially substantial, in the near term before bouncing back to the 3-month target.

In terms of timing, the EUR/$ forecast path assumed that the Italian funding hump in February is the key event to watch and therefore the broad design of a comprehensive European policy response would become apparent during 1Q. Beyond that point, the gradual relaxation in Eurozone risk premia would then translate into better performance more broadly of risky assets. Given strong cross-asset correlations - and a risk premium in the EUR itself – this then would also be expected to help the Euro recover.

Underlying broader USD weakness would help this move towards 1.45, our 12-month forecast. In that respect it is worth keeping in mind that, relative to the US, the Eurozone actually does address structural fiscal issues.

How are we doing with this forecast: So far, things have not deviated too much. There is some intensification in Eurozone fiscal concerns visible currently and the December summit left important issues unresolved, in particular on the enforcement side of better fiscal policy coordination in the Euro area. Italian bond yields and the trade-weighted EUR have duly responded, with the latter having lost about 3% since early December. The whole idea of markets forcing policymakers into action in our view means it is very likely that these trends will continue in the short term.

Macro changes we did not fully anticipate: Beyond the simple rise in risk premia, there have also been developments that suggest more broadly a downward shift in the expected EUR/$ trajectory. US growth has been more resilient and the ECB liquidity injection more forceful than thought in early December. At the margin, this has shifted the growth/monetary fiscal mix towards a deeper trough and a somewhat weaker subsequent rebound in EUR/$. Moreover, we see a risk of further substantial ECB balance sheet expansion in addition to the one already seen.

About the difficulties of forecasting a market-dependent policy move. A considerable complication when forecasting in the current environment is that we know we would look wrong at some point even if spot perfectly followed the expected trajectory. This is because a majority of market participants have to believe in a Eurozone blow-up, push asset prices lower and therefore trigger a policy response. We have seen this dynamic at work before and the difficulties of translating a market-conditional worse-before-it-gets-better view into a sensible forecast path.

How much lower how quickly? With considerable downside risk in the short term, within our regular 3-month forecasting horizon, the key questions are about the speed and magnitude of the initial sell-off. If we had to publish forecasts on a 1- and 2-month horizon, we could see EUR/$ reach 1.20. In other words, we expect the EUR/$ sell-off to continue for now as risk premia have to rise initially.

1.20 to 1.45 in less than a year? Inserted into our regular forecasts, such a gloomy short-term scenario would also imply a very substantial and steep rally later in the year.

We are less sure about that assumption than we were, though the notion that EUR/$ rallies by 25 big figures in less than a year is more common than some often assume. In fact, we have seen quite a few similar moves in recent years, as the table below shows, and typically they have occurred faster than the recovery we currently project. On the other hand, as mentioned above, the marginal macro news on either side of the Atlantic suggests that the expected rebound may not necessarily live up to the more extreme scenarios of the recent past.
In that respect, the risks to our current 6- and 12-month forecasts appear skewed toward a less extreme move this time.

Uncertainties about timing. One obvious risk is the exact timing when the point of deepest despair is reached. The Italian bond rollover in February is one obvious point, as mentioned above. But if the Italian government issues mainly short-dated bonds, the funding hump may actually be less of a challenge, in particular with ample ECB liquidity supply.

The Greek PSI debate (March) or French elections (April/May) are other potential trigger events, well beyond the 1- or 2-month horizon. There is clearly a risk scenario where a comprehensive policy response may only become visible by the middle of the year. This would imply some clear downside risks to our 3-month forecasts as well and a delayed start to the subsequent Euro recovery.

But things could be worse still, with our European economists arguing that an eventual break-up cannot be ruled out. All of this highlights the large uncertainties around any medium-term path when a wide range of outcomes is conceivable

Goldman's Stolper Speaks, Sees EUR Downside To 1.20: Time To Go All In? | ZeroHedge

Reply With Quote


futures io > > > > Goldman's Stolper Speaks, Sees EUR Downside To 1.20

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Upcoming Webinars and Events (4:30PM ET unless noted)

Wyckoff Hunting for Great Risk/Reward Ratio w/Gary Fullett

Elite only

Digging into the Details of iSystems w/Stage 5 & iSystems

Jun 5

Similar Threads
Thread Thread Starter Forum Replies Last Post
Guest Post: A Twenty Something Speaks Quick Summary News and Current Events 0 December 4th, 2011 12:30 PM
Dividend Stocks: Less Of The Upside And More Of The Downside Quick Summary News and Current Events 0 November 15th, 2011 11:50 AM
G-20 Demands German Gold To Keep Eurozone Intact; German Central Bank Tells G-20 Wher Quick Summary News and Current Events 0 November 6th, 2011 02:00 AM
Do you trade while Bernanke speaks? essiar Traders Hideout 5 March 9th, 2011 10:39 PM

All times are GMT -4. The time now is 10:37 PM.

Copyright © 2018 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432,
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2018-05-25 in 0.08 seconds with 19 queries on phoenix via your IP