Rebirth of the Capital Legend

Chapter 281 Goldman Sachs rebels against the bull camp!
"It seems that the trend of the pound exchange rate is still unable to escape the volatility!"

Noting that the pound exchange rate fell rapidly and once again fell below the support level of 1.5300 points, Dominic, a hedge fund manager at the foreign exchange investment and trading department of Goldman Sachs Group on Wall Street, lamented: "Under the impact of positive news, the market trend did not rise but fell. This shows that there are already relatively large differences among investors in the market regarding their expectations for the referendum results on the 23rd, and the game between long and short positions is far from as simple as it seems on the market."

"Previously, major institutions had relatively low expectations for the recovery of the British economy, and even the European economy." Hearing Dominic's words, Christine, chief analyst of the foreign exchange investment market, responded, "This is also the fundamental reason why the exchange rates of European currencies such as the euro, pound, and Swiss franc have continued to fall in the past two years.

Now, due to the UK's referendum to leave the EU.

From a fundamental analysis perspective...

Regardless of the outcome of this incident, it has clearly exacerbated the internal problems of the EU economic system and highlighted its more acute internal contradictions.

That is to say, no matter what the outcome of this incident is.

All of these will further reduce expectations for economic recovery in the EU system and put further pressure on the future exchange rates of the entire European currency.

It’s just that the Bank of England’s more proactive monetary policy and open market operations in recent times have brought some positive impacts on the trend of the pound sterling exchange rate.

In addition, after a long period of continuous decline, the pound sterling exchange rate has reached its lowest level in recent years, approaching the low point in 08.

There is a need for a rebound in technical form.

This led to a strong bullish recovery on the market.

In fact, I think the long-term trend of the pound exchange rate has not been changed.”

"Ms. Christine, I didn't expect you to miss out as well." Dominic said with a smile, "I remember you didn't think so half a month ago."

Christine smiled and said, "Half a month ago, the pound exchange rate was still below the 1.5000 mark. At that time, the pound exchange rate, under the Bank of England's rather radical monetary policy guidance and open market operations, did have a strong rebound demand.

The British Cabinet was able to pass a resolution on the 'national Brexit referendum'.

To me, it was an accident.

Today, the pound has rebounded by more than 1.4500 points from the 800 level where the Bank of England first conducted open market operations. It can be said that it has reflected the positive news that everyone expected. It is naturally difficult to continue to rebound, and the pressure for a rebound will naturally increase. "

"But other analysts in our agency don't think so," Dominic said. "Others believe that although the recovery of the European economy is likely to be lower than expected, the future is still worth looking forward to for the UK, which has already gained the initiative in the EU economic system."

"The manufacturing industry is hollow, the industrial structure is seriously unbalanced, the political ecology is gradually chaotic, and the conflicts in England and Scotland are further intensifying..." Christine enumerated the various core social issues in the UK and said with a smile, "I really can't see where the potential for economic recovery in the future is. Sometimes I have to admit that the truth is always in the hands of a few people. Under the current market situation, I think the success rate of shorting the pound exchange rate should be much higher than that of going long on the pound exchange rate."

Dominic smiled and responded: "That's not the case. From another perspective, although the Brexit referendum is likely to be a blow to the entire EU economic system, it is also a real negative for the future trend of the euro exchange rate.

But for the UK, which is currently at the center of global investors' attention, and the trend of the pound exchange rate.

I don't think it is a completely negative attribute.

It should be noted that according to the previous EU agreement, the obligations assumed by the UK in remaining within the EU system are far lower than the benefits.

If it leaves the EU, its national economic development will be able to get rid of a large number of heavy burdens and return to a state of economic development with light equipment.

Under the heavy burden, its economic recovery has not received a significant boost.

When you get rid of a lot of burdens and don't have to bear many obligations, natural development becomes easier than before.

After all, after leaving the EU, the government's burden will be much lighter and the government's financial pressure will not be so great."

"But after leaving the EU economic system, although the burdens that were supposed to be borne have been thrown off, many trade projects that were originally closely cooperated will also be affected when the interests are no longer aligned." Christine responded, "The pros and cons here are actually very difficult to sort out and see clearly.

However... the fact that the entire EU economic system is gradually losing its vitality and declining is a conclusion that can be easily drawn without any in-depth analysis.

So, I still insist that even if the UK successfully leaves the EU.

It is also difficult to truly break away from the influence of the entire EU economic system, and it is also difficult to get out of the quagmire of economic stagnation and even recession. "

"So do you think... that our institution should now short the British pound exchange rate like Citibank, BNY Mellon, Blackstone Group, Aberdeen Asset Management and other institutions in terms of actual foreign exchange investment position trading strategy?" Dominic asked. "What do you think the referendum on the 23rd will result in?"

Christine responded: "It is difficult to predict the result of the referendum on the 23rd, but in fact... I think the result of this referendum will not have a fundamental impact on the trend of the pound exchange rate.

In today’s market...

All long-term institutions have already fully anticipated the outcome of the referendum on the 23rd to be a stay in the EU.

If the referendum result is as expected by these bullish institutions, then given that the pound sterling exchange rate has rebounded from around 1.4500 to around 1.5400 in nearly half a month, it is very likely that the positive news will take effect and the bearish trend will reverse. It is very likely that the many long positions that have already made profits in the market will be forced to stop profit and cover their positions.

Similarly, if the referendum results are different from the expectations of these long institutions in the market.

So, this 'black swan' happened.

It will also cause severe damage to the current pound exchange rate market, causing long institutions and a huge amount of long positions in the market to form a run-covering pattern. "

"According to your analysis, the only way for the pound exchange rate to move forward is to continue to fall?" Dominic asked, "and there are no other possibilities?"

Christine nodded and said, "I think this is the only possible trend. After all, the volume of long and short positions accumulated in the market is already very large. If there is no extreme and violent market fluctuation, it is impossible to clear such a large volume of positions.

Therefore, it is impossible for the pound sterling exchange rate to remain flat even if it wants to.

Since it is impossible to go sideways and the probability of breaking upward is extremely small, the most likely thing is that the previous downward trend will continue and break downward." "Looking at the trend of the pound exchange rate, it seems that the institutions such as Blackstone Group, Citibank, and Bank of New York Mellon are likely to have similar ideas to yours." Dominic smiled and said, "From the perspective of various analysis factors, although I cannot agree with all your views, we are relatively consistent in the expected trend of the pound exchange rate and the current trading strategy."

"Mr. Dominic, are you also planning to switch from long to short?" Christine asked with a smile.

Dominic replied: "It doesn't matter whether you are bearish or bullish. No matter how we analyze the future market trend, we are actually just gambling. In this case... when choosing a trading strategy, we can only bet on the direction with the highest probability."

"That's right." Christine nodded slightly.

"I heard that this round of long-short battle in the pound exchange rate was actually caused by a small Chinese-funded institution far away in Hong Kong," Dominic said. "Did you know this?"

Christine responded, "I've heard about it, too. The name of this institution seems to be Huayi Capital. If it weren't for the massive short selling by this institution, the number of long and short positions in the pound exchange rate market wouldn't have accumulated to such a large scale. And... I seem to have heard that Mr. Frederick of the main hedge fund Aberdeen Asset Evolution No. 1 changed his trading strategy and recently shorted the pound exchange rate on a large scale. This was also due to the influence of this institution's bearish views."

"Oh, really?" Dominic was a little surprised to hear this.

Christine smiled and continued, "I heard that the fund manager of Huayi Capital has published a bearish analysis report online, and has also issued a challenge to a number of asset management institutions around the world that are long on the British pound exchange rate, as well as to many retail investors who are long on the market."

"That's interesting." Dominic said in surprise, "It seems that I should learn more about the background of this organization when I have time."

"I've read the bearish analysis report that this person posted online, and I think it makes some sense." Christine said, "This time, the investment style of 'Huazi' in the pound exchange rate market is completely different from before. I suspect that the operator behind this is the manager of this institution.

Moreover, I also suspect that this guy is openly shouting on the Internet and issuing a challenge to the market bullish institutions.

Its fundamental purpose is to induce emotions and lure more people into buying.”

"Yueduo?" Dominic asked in surprise, "This shouldn't be possible, right?"

Christine spread her hands and said with a smile: "I just suspect it, but I have no evidence."

"Well, let's not discuss the real purpose of this Chinese-funded institution." Dominic felt that there was no need to delve into it so deeply. He nodded slightly and turned his attention to the trend of the British pound exchange rate again. He said, "There are really a lot of smart market funds that agree with your point of view!"

Christine said: "With the lessons learned from last year's 'Swiss franc black swan', many Wall Street institutions now know how to avoid risks."

"No wonder the price of spot gold fluctuates so much." Dominic said with a smile, "But we don't need to hedge the transaction."

After saying this, Dominic turned his attention to the groups of traders in the trading room again.

We quickly gave everyone the order to cover their long positions, switch from long to short, and gradually build up short positions to attack the British pound exchange rate with corresponding trading strategies.

When Dominic made a bearish and short-selling trading strategy.

When tens of millions and hundreds of millions of dollars of funds from the foreign exchange investment and trading department of Goldman Sachs Group were poured into the short direction of the British pound exchange rate.

Soon, the exchange rate of the pound plunged again.

And as trading time continues.

At 3 a.m. Yanjing time, near the end of the U.S. trading session.

In the entire market news, the news that "Goldman Sachs Group" turned from long to short and massively shorted the British pound exchange rate also began to spread gradually.

This ultimately led to the pound sterling exchange rate continuing to plunge in the late U.S. trading session.

It closed close to the 1.5200 mark.

Later, when the market trading time shifted to the Asian trading session on June 6, the pound exchange rate continued to fall below the 21 mark under the influence of the news that Goldman Sachs Group had turned from long to short, burying all investors who had gone long above 1.5200 points and a number of institutions that had increased their long positions.

"Fuck, I never thought that Goldman Sachs, which was bullish the week before, would betray us."

6:21 a.m., Tuesday, June 8, Yanjing time.

During the market trading hours, shortly after entering the Asian session, in Hong Kong City, in the internal main fund trading room of Tianhe Capital, Gu Chijiang, the general manager of the company and the fund manager, saw the British pound exchange rate opening low and going down to 1.5170 points, as well as the fund holdings data that were already in an overall floating loss state. He became irritable in an instant and could not help but curse.

"Mr. Gu, what should we do now?" Xie Hongxing, manager of the trading team, asked with a frown.

After continuous increase in positions at high levels.

Nowadays, the number of long positions held by their institutions has become quite large.

Moreover, the exchange rate trend of the pound has not actually changed much at present, and there has been no fundamental change in the expectations for the referendum results on the 23rd.

In this case, the overall position has fallen into a loss state.

If they had to choose to close their positions and stop losses, neither Xie Hongxing nor Gu Chijiang would feel willing to do so.

Gu Chijiang paced back and forth in the trading room, hesitated for a while, and said: "Let's wait and see. I don't believe there is no substantial negative news. When the market generally expects that it is still bullish, can the pound exchange rate fall below the 1.5000 mark? As long as it does not leave the shock range, we will hold it."

After saying that, Gu Chijiang immediately connected to the trading department of Huifeng Global Hedge Fund.

He asked Godfrey, whose long positions were larger than his, for his opinion.

Godfrey noticed Gu Chijiang's mood swings, smiled calmly, and consoled him, "So what if Wall Street capital is shorting? This is just a disturbance in market sentiment before the referendum. Don't worry. And... the latest news I got is that the Bank of England and government agencies are already planning a short-selling attack on 'Wall Street capital' that maliciously shorted the pound exchange rate and hyped up short-selling sentiment."

(End of this chapter)