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Goldman Sachs and Jim Rogers are Long the EUR/USD

by Rafael Rosa on March 18, 2010

cartoon no us dollar Goldman Sachs and Jim Rogers are Long the EUR/USD

It seems like the U.S. Dollar (specifically the US Dollar index) will be tanking in the near-term, at least according to Goldman Sachs, Jim Rogers, SocGen, and many others.

Here is a pie chart showing the currency composition of the US dollar index:

us dollar index Goldman Sachs and Jim Rogers are Long the EUR/USD

As we can see, if the expectation is for Euro appreciation, it most likely means a tanking Dollar index.

I always like to watch what the big boys are up to in the FX markets. Goldman Sachs is recommending buying the Euro-dollar, specifically they’re saying:

“While we do see sustainable dollar strength in the more distant future, we think the short-term pressures are likely to reverse,” Goldman Sachs analysts including Thomas Stolper in London wrote in the report. “Euro-dollar has the potential to rally from here towards our three-month forecast” of $1.45.” (Business Week)

And I don’t quite like positioning myself against Goldman. The conspiracy theorists like to argue that if Goldman says buy, it means it’s time to sell. I disagree. I think it means you buy with a tight stop and get out before the target.

Famous investor Jim Rogers also says he’s buying Euros. I don’t agree with Jim Rogers in a lot of things, but he does have a proven track-record. He’s a perma-bull when it comes to commodities and usually very negative on the US dollar, which is something to keep in mind when listing to his talking points. Here’s a Bloomberg video with all his opinions:

Last but not least, SocGen is also suggesting the EUR/USD will climb to 1.3820, which according to most chartists is the key level it needs to break in order to technically halt the current downtrend.

“After flirting with the $1.3840/50 resistance area yesterday, the euro eased back, but we think that this down-move is corrective,” the analysts wrote. The support area “should limit the downside and force the euro to point back to $1.3840/50,” the analysts wrote.

A break above this resistance zone is needed to turn the short-term outlook bullish, they wrote.” (Bloomberg)

There are also other big banks recommending the EUR/USD. Overall, it seems like the Euro will probably regain some traction in the short-term. I would be a buyer at the key 1.3550 level which has been holding up like a solid rock. In the medium-term, I’m still a US dollar bull.

The biggest downside danger (besides Greece) in the EUR/USD rally comes from the possible retracement in U.S. equities and consequent unwind of the FX risk-trades.

In my last post (GBP/USD Short Squeeze), I talked about how I’m looking to scalp long position in the GBP/USD pair. The Euro is different because of the imminent real problems from the likes of Greece (Example: Europe split on Greece assistance). As of now, I’ll be scalping both ways but with a bias toward long EUR/USD positions.

Markets are murky and muddy. I’m keeping trading horizons short and stops even tighter. VIX at 16.00 is a joke and I’m expecting some spikes in volatility in the near future.

Technorati Tags: Currency Trading, euro analysis, euro dollar, fx trading, Goldman Sachs, jim rogers, long eur/usd, long euro, socgen, Technical Analysis, us dollar index

{ 4 comments… read them below or add one }

Venerability 03.27.10 at 4:40 pm

I don’t and have never traded forex.

But I’m a student of “technical analysis of propaganda.” And I don’t think I’ve ever seen such loud and virulent anti-Euro propaganda, especially from the U.K., in fifteen years of market observation.

Generally, that means the smart money should take the other side of the trade.

What is most striking to me is the stance of the various Get-Rich-Quick amateur forex trading sites, geared towards follow-the-herd daytraders.

They are literally all calling a bet against the Euro the “Trade of a Lifetime,” often in glaring multi-colored headlines.

Contrast this raucous screeching to quiet - and apparently utterly disregarded -news that:

1. Limits on forex positions by small to medium speculators may well be in the works internationally.

2. Long-muted calls for so-called “Tobin taxes” coming fairly consistently from professors of finance and other gurus, especially those based in Asia.

3. Several newspaper leaks in Europe and the Middle East that Interpol and other agencies are investigating heavy short-Euro trading by organized crime. Imagine what a few blaring headlines about arrests in this area could do to the forex markets literally overnight.

So let us see what we will see.

admin 03.29.10 at 9:49 pm

I completely agree with you!

Plus, anytime the whole crowd, especially the retail investor, is in a trade, it probably means it’s time to get out.

I just wrote a post about a potential Euro rally, take a look!

torontoboy 04.25.10 at 4:52 am

This is piece of crap analysis and false information presented. Eur has been dropping like crazy since March 2010 and is expected to go to 1.28 and this guy is saying its about to rally. Rally? Rally with all that Greece, Portugal and Spain problems? Earth to Writer, Earth to Writer..

admin 04.26.10 at 6:47 pm

@ torontoboy,

“this guy” as in the author or Jim Rogers?

First, this post aims to expose a different perspective on the Euro issue. I’m an intraday trader, not long-term fundamental, and was not giving advice to buy Eur long-term. As clearly stated, I said I would have a long bias on an INTRADAY basis.

Second, following this post, the EUR did rally for a few days. It collapsed again due to the Greece factor, which once again, is noted at the end of the post as a headwind to pay attention to.

Yes, Greece and Spain, and what-not are problems. But it does not mean that the EUR will imminently collapse. Have you heard of the tech bubble? the real estate bubble?

Lasty, the “markets are muddy and murky” line suggest that direction is likely to be ambigiuous.

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