2010-09-24

Speculators go long on the euro

The picture says it all, speculators are now net long on the euro. This is the first time they've turned net long since then end of November 2009, just as the euro rally was coming to an end.


Here's a long-term chart of speculative positions going back a decade, from a ZeroHedge post in March.

Here's a look at CurrencyShares Euro (FXE) on a daily and weekly basis. In the daily chart, it certainly looks overbought in the short-run. The weekly chart portends far more bullishness, if the market wants to go there, with RSI just over 50 and MACD still in negative territory.



This was one of the best weeks for the euro in the past three years, and it was similarly one of the worst for the U.S. dollar and PowerShares DB U.S. Dollar Index Bullish Fund (UUP). The technicals for the greenback are worse, with RSI on the weekly chart already headed towards oversold levels, thanks to strength in currencies such as the franc and yen.
UUP needs to hold above the $22.25 level for the rally to remain in effect and that level is close, with only a repeat of this week's move necessary to break it. I expect it will firm up in the coming weeks, as headlines such as this are eventually going to break the euro again.

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