A dramatic Hail Mary appeared in the FX markets earlier this morning following the circulation of a rumor, since attributed to Goldman sales, that the FRBNY is preparing to slash its FX swap line with the ECB rate, which would in turn make it virtually free to borrow Dollars from the Fed and make the Libor funding market completely irrelevant as the Fed would give dollars to European banks for virtually no money. Frankly, we will believe it when we see it, especially when one considers the source. Why it is none other than the firm's Dominic Wilson who reminded us today that Goldman clients should "Stay long EUR/$, opened at 1.4085 on 18 March 2011, with a target of 1.50 and a stop on a close below 1.35, now at 1.3545"... well make that 1.339 when the supposedly Goldman-initiated rumor hit and has since pushed the currency to nearly 1.35. The problem is this rumor is, without confirmation, patent bullshit, as the last thing the Fed need is for Republican to take it to task, this time completely justified, for sending dollars abroad on a cost-free basis just to bail out Europe again. We would fade this rumor all the way, especially with the EURUSD about 100 pips rich to pre-rumor fair value. Furthermore should the EURUSD close below 1.35, which it will, look for major stop loss signals to be activated which purely on technicals will send the EUR far lower.