Goldman calls a bottom to the USD

As the dollar rallied for a tenth consecutive session on Thursday, Goldman Sachs rather excitedly reversed its outlook for the currency.

“The dollar has bottomed!” analysts led by Thomas Stolper wrote. “Dollar lows are almost certainly behind us.”

Stolper’s 3-month, 6-month and 12-month euro forecasts are $1.45, $1.50 and $1.40; over the same timeframes, he expects the dollar to reach Y110, Y108 and Y114.

Goldman had previously forecast $1.56 vs the euro within the next three months, and had predicted Y106 for the same period.

Still, the investment bank is hedging its bets, noting the road ahead - at least until the end of this year - may be bumpy.

Potential risks include weak global demand for US exports, oil price volatility, disappointing economic data, unwinds of long dollar positions and portfolio rebalancing at global central banks.

Nonetheless, Goldman says, “the underlying picture has turned much more dollar positive”.

http://ftalphaville.ft.com/blog/2008/08/15/15095/goldman-calls-a-bottom-on-the-us-dollar/

 

I suspect they are correct, but my long position over the last two months might have me biased.

 

I've been wondering when traders on the GS trading desk would start to get overconfident. They blew the oil trade out of the park. But it seems they have been run over with a freight train now. The dollar, commodities will probably be their achilles heel at the next earnings release.

They call a dollar bottom at 1.46 versus euro and 110 versus yen!!!! A little late to the party on this one.

 

Fools who try to catch a falling knife wipe out their profits.

 

There is nothing wrong with a trend so long as there is a valid reason for it to be in place. When that occurs, you should buy in that direction, you certainly have momentum and fools on your side.

There is also nothing wrong with buying near the end of a trend, or shorting near the end of one eithier, again if there is a valid reason for the expected move to occur. To think that "the trend is your friend" is going to make you rich is too easy my friend, its a good place to start, but its only a very small start.

There are thousands upon thousands of instruments traded, some of them in a trend, others are not. If I have a hundfull of 10,000 quarters and flip them, each time removing to flip again the stock that rolls heads, eventually I'll hand a small handfull of stocks that are in head trends 20 or so times in a row, a very strong heads trend indeed.

 

Ahhh there's nothing like a bit of averaging down, huge unrealized losses waiting for the market to turn, sleepless nights, margin calls.....those were the days, when traders were real men and nothing like these limp-wristed latte-drinking faggots who use stop losses nowadays, bunch of freeloading druggies the lot of 'em!

 

I dont think that anyone said anything about averaging down into the loser, although from time to time, not as a rule but as an exception, it can be the thing to do. Anyone who gets into a trade without a well defined risk control plan deservices to lose, but just because the plan doesnt conform to what you think a "successful" traders plan looks like hardly means its not a good plan.

 

This is contradictory to practice that has paid me very well, that of keeping the trend asyour friend. To guess the end of a trend is folly. The number of traders who try and fail to catch a falling knife far exceed those who wait for confirmation that the trend has changed and then cash out or enter.

 

Nothing was said about buying, or even trying to buy, the bottom tick. That would be stupid, but if you have your analysis in place and things start to fit together you pull the trigger. If the trend is an important part of that analysis great, if its not great. To think that you have been successful only because you trade in the direction of the trend is probably wrong. Its how I started as well, and slowly started to play around with very small amounts of money doing different things. Anyway, I have not been trying to be agrumentative with you, just trying to show a different view.

 

Well a risk control plan is either sensible or it isn't, I'm not sure it's so much a matter of conforming as one of common sense and math.

I guess it doesn't matter so much how one risks the money (averaging, top picking, bottom fishing, or whatever), as long as the risk is like you say, controlled.

Being serious, there's many a time I've caught a falling knife against the general consensus and market sentiment, being contrarian can and does pay off sometimes.