Six days ago we posted "Unbelievable! Once Again Goldman Sachs' Foreign Exchange Team Gets it EXACTLY Wrong (EUR/USD) GS" with EUR/USD at 1.3486. An Irish bailout later we're at 1.3156 after trading as low as 1.3107.
Here's a twofer from ZeroHedge. First up, November 25, 2010:
Despite A Crumbling Europe, Goldman Sticks With Its 12 Month $1.55 EURUSD Forecast
Goldman's Thomas Stolper joins Erik Nielsen with an updated, and painfully bullish, Euro forecast: "our baseline is that these risks will not escalate much further." As Stolper is the guy who has successfully top.ticked.every.single.move in FX, it is time to call the undertaker (the profit margins on a coffin the size of Europe will be sufficiently high no matter the input cost of lumber).And November 28th, 18:16:
Not surprisingly then Stolper follows up: "we believe EUR/$ remains very much on track for the projected trajectory of 1.40 in 3mths as well as 1.50 and 1.55 in 6 and 12 months." Recall that Stolper came out with his upward revised EURUSD forecast just before the pair topped out in the low 1.40s (which was shortly after he scrapped his 1.15 target just after the eurozone stopped its implosion last time around after the Stress Test lie and QE2 rumors started). In other words, we just doubled down on our bet that John Taylor is once again spot on. What is unsaid here is that Goldman expects the world to start pricing in QE3 imminently, and punish the USD: "one question we face very often is about the viability of Eurozone growth with EUR/$ at 1.55. Our answer is that we really believe in broad USD weakness."...MORE
The Euro Has Become Schrodinger's Money: Goldman Sees European Currency As Both Alive And Dead
It's time for a shirt: "Irish bondholders got a bailout and all the EURUSD managed was a measly 35 pips higher." It seems the currency vigilantes are calling the bluff in JC Trichet, and tomorrow Portuguese bonds will be next on the bidless brigade, further validating that the IMF's, just like the Fed's, primary mandate is to rescue insolvent bankers everywhere there is a taxpayer population that can be raped. But back to the EUR: at last check the currency was trading well inside 1.33, and only about 2.2k pips from Thomas Stolper's 12 month target of 1.55. Not to begrudge anything to Tom: after all, post QE4 he will certainly be spot on (the only question is how long it take Blackhawk Ben to get us there), but we wonder if another Goldman luminary got the memo. To wit: in an interview with the Telegraph, Jim "BRIC" O'Neill told Kamal Ahmad that "the eurozone must embark on a significant round of fiscal and political harmonisation if the euro is to survive...there are elements of the black swan concept that seem rather applicable to the EMU story" and if that wasn't clear enough, he added that the "euro should carry a "risk premium" and that it was over-valued by at least 10pc."As we said in that Nov. 23 post:
Bottom line, according to O'Neill the "fair value for the euro is €1.20 against the dollar and anyone buying it 10pc above that is not very sensible." Uh.... What? Did Wikileaks intercept the memo from Thomas Stolper sent out just this November 25, in which the chief currency strategist said: "Overall, we believe the EUR/$ remains very much on track for the projected trajectory of 1.40 in 3mths as well as 1.50 and 1.55 in 6 and 12 months." And like that, Goldman has all bases covered. Of course, seeing how the outcome is binary, Goldman has just discovered the Schrodinger currency: per the bank that rules the world, the euro is now both alive and dead at the same time.
As a reminder, here is what Stolper said 3 days ago...MUCH MORE
...Here's the history of Goldman's Forex team over the last year:
July 16, 2010
"Goldman's FX Team Validates Cynical Critics, Capitulates On EURUSD Recommendation ONCE AGAIN" (EUR/USD)
All that being said, the euro is oversold on a short term basis and could pop violently.
In the long run the euro is dead; the question is: can it last until it and the buck are replaced by some U.N. sanctioned world currency?
"And I, for one, welcome our new insect overlords"